Gartner Dataquest Says 2001 is a Year Battered PC Vendors Would Rather Forget

Preliminary Results Show the Market Declined for the First Time Since 1985

SAN JOSE, Calif., January 17, 2002 - For just the second time in the history of the PC market, year-end shipment totals show the worldwide and U.S. PC industries experienced a decline in shipments, according to preliminary results from Dataquest Inc., a unit of Gartner, Inc. (NYSE: IT and ITB).

Worldwide PC shipments totaled 128 million units in 2001, a 4.6 percent decline from 2000 (see Table 1). PC shipments in the United States reached 44 million units, an 11.1 percent decline from the previous year. The PC industry has not experienced such a difficult year since 1985 when worldwide PC shipments declined 2.3 percent, and U.S. PC shipments dropped 21.8 percent.

"Economic conditions combined with saturation issues in developed markets continue to impact PC market growth rates. Performance over delivery on the PC platform is allowing existing users to postpone PC upgrades," said Charles Smulders, vice president of Gartner Dataquest's Computing Platforms Worldwide group. "Preliminary indications show that, in the fourth quarter, we saw no return to buying in the fortune 500 market, but a slightly better than expected performance in the consumer market."

While all of the top-tier vendors experienced double-digit declines worldwide in 2001, Dell grew 18.3 percent and moved past Compaq as the No. 1 vendor based on shipments.

Table 1
Preliminary Worldwide PC Vendor Unit Shipment Estimates for 2001 (Thousands of Units)

Note: Data includes desk-based PCs, mobile PCs, and PC servers
Source:Gartner Dataquest (January 2002)

In the U.S. PC market, Dell's market share increased to 24.5 percent (see Table 2). Even with the proposed merger of Compaq and Hewlett-Packard, Dell would still be the No. 1 vendor based on shipments since Compaq and HP accounted for 22.5 percent of U.S. PC shipments in 2001.

"The result of the mismatch in supply and demand has been falling average selling prices (ASPs), increasing margin pressure and a reduction in industry headcount as operating expenses were brought in line with the new business environment. Dell led the price reductions in the first quarter of 2001, leaving its competitors faced with the choice of following its lead or face major share losses," Martin Reynolds, vice president and research fellow for Gartner.

"Pressure from the price drop was quite significant for Compaq, and the company experienced double-digit ASP declines year-over-year in Compaq's Access Business Group. One aspect of the company's steep shipment decline was from a possible negative influence from the HP and Compaq merger," Reynolds said. "In the fourth quarter of 2001, HP did experience a 37 percent growth from the third quarter of 2001, although its year-over-year growth was still negative. Some of HP's sales have also come at the expense of Compaq."

Table 2
Preliminary U.S. PC Vendor Unit Shipment Estimates for 2001 (Thousands of Units)

Note: Data includes desk-based PCs, mobile PCs and PC servers.
Source:Gartner Dataquest (January 2002)

Gartner Dataquest expects that five out of the eight regional markets will show a year-over-year decline in the fourth quarter of 2001. Those regions are the United States, Western Europe, Japan, Canada and Latin America. Asia/Pacific, Central and Eastern Europe, and Middle East and Africa are expected to show modest growth.

Gartner Dataquest analysts said the current estimates are for worldwide PC shipments to decline 4 percent in the first quarter of 2002, but finish the year with a growth rate of 4 percent.

"While there is a mood of optimism in the industry, having made it through the bloodbath that was 2001, evidence for an immediate improvement in the first quarter of 2002 is far from clear," Smulders said. "On the positive side, it does not appear that the market is getting worse. We do not expect to see a significant upturn in growth until the fourth quarter of 2002. This based on an economic upturn in the second half of the year."

These results are preliminary. Final statistics will be available soon to clients of Gartner Dataquest's PC Quarterly Statistics Worldwide by Region program. This program offers a comprehensive and timely picture of the worldwide PC market, allowing product planning, distribution, marketing and sales organizations to keep abreast of key issues and their future implications around the globe. To subscribe to this program, please call 800-419-DATA, or 408-468-8000. Additional research can be found on Gartner's Hardware and Systems Focus Area on Gartner's Web site at www.gartner.com/1_researchanalysis/focus/hwmkt_fa.html.

Gartner Dataquest is the recognized leader in providing the high-technology and financial communities with market intelligence for the semiconductor, computer systems and peripherals, communications, document management, software, and services sectors of the global information technology industry.

Gartner, Inc. is a research and advisory firm that helps more than 11,000 clients understand technology and drive business growth. Gartner's divisions consist of Gartner Research, Gartner Consulting, Gartner Measurement and Gartner Events. Founded in 1979, Gartner, Inc. is headquartered in Stamford, Connecticut and consists of 4,300 associates, including 1,200 research analysts and consultants, in more than 90 locations worldwide. The company achieved fiscal 2001 revenue of $952 million. For more information, visit www.gartner.com.