Gartner Dataquest Says Worldwide PC Market Experienced Negative Growth for First Time Since 1986; Gartner Dataquest Study Releases Preliminary Second Quarter Results.

Business Editors

SAN JOSE, Calif.--(BUSINESS WIRE)--July 20, 2001

The U.S. economic situation is having a growing impact on other regions, and the worldwide PC industry continues to be affected.

Worldwide PC shipments in the second quarter of 2001 totaled 30.4 million units, a decline of 1.9 percent from the second quarter of 2000, according to preliminary results from Dataquest Inc., a unit of Gartner, Inc. (NYSE: IT and ITB). This is the first time the worldwide PC market has had a negative growth rate since 1986.

"Without a major shift in the PC industry structure, future sustained high-growth rates are improbable. To address these issues, the industry needs to create a more compelling value proposition for users that extends beyond the typical price/performance metrics that have dominated industry thinking," said Todd Kort, principal analyst of Gartner Dataquest's Computing Platform Worldwide group. "For the time being, vendors continue to opt for price cutting rather than changing PC design to stimulate growth."

Dell was the only top-tier vendor to have positive growth rates both worldwide and in the United States (see Table 1 and Table 2). Dell increased shipments throughout the world, particularly in Japan, Asia/Pacific and Latin America, with 30 percent to 50 percent growth.

Table 1
Preliminary Worldwide PC Vendor Unit Shipment Estimates for 2Q01
(Thousands of Units)
----------------------------------------------------------------------
               2Q01   2Q01 Market      2Q00    2Q00 Market
          Shipments    Share (%)    Shipments   Share (%)   Growth (%)
Company
----------------------------------------------------------------------
Dell          4,000        13.1        3,328        10.7         20.2
Compaq        3,397        11.2        3,966        12.8        -14.4
IBM           2,130         7.0        2,288         7.4         -6.9
Hewlett-
 Packard      2,065         6.8        2,258         7.3         -8.5
NEC           1,258         4.1        1,374         4.4         -8.5
Others       17,578        57.8       17,818        57.4         -1.3
Total
  Market     30,429       100.0       31,033       100.0         -1.9
----------------------------------------------------------------------
Note: Data includes desk-based PCs, mobile PCs and PC servers.
Source: Gartner Dataquest (July 2001)

"Despite being overdue for an upgrade cycle in both the home and professional segments, Europe continues to under perform relative to expectations. Initial estimates show the Western European PC market will exhibit negative growth," said Mikako Kitagawa, industry analyst of Gartner Dataquest's Computing Platform Worldwide group. "Asia/Pacific is expected to experience single digit growth in the second quarter. Latin America is feeling the impact of economic events in the United States, and it is expected to slow to low teen growth levels. In Japan, only mid single-digit growth is expected because of a weak home market."

The United States experienced its second consecutive quarter of negative growth as the U.S. PC market declined 6.1 percent in the second quarter of 2001. Price pressures intensified in the United States as some competitors followed Dell with substantial price reductions. Gateway declared it would beat the lowest price from competitors on comparable PC configurations, while HP and Compaq lowered prices for their business desktop models.

Table 2
Preliminary U.S. PC Vendor Unit Shipment Estimates for 2Q01
(Thousands of Units)
----------------------------------------------------------------------
               2Q01   2Q01 Market       2Q00   2Q00 Market
Company   Shipments    Share (%)    Shipments   Share (%)   Growth (%)
----------------------------------------------------------------------
Dell          2,534        23.6        2,200        19.2        15.2
Compaq        1,380        12.9        1,669        14.6       -17.3
Hewlett-
 Packard        991         9.2        1,221        10.7       -18.8
Gateway         798         7.4          953         8.3       -16.3
IBM             638         5.9          715         6.3       -10.7
Others        4,394        40.9        4,676        40.9        -6.0
Total
 Market      10,735       100.0       11,433       100.0        -6.1
----------------------------------------------------------------------
Note: Data includes desk-based PCs, mobile PCs and PC servers.
Source: Gartner Dataquest (July 2001)

"While inventory efficiency remains extremely important in managing gross margins, gross margin continues to erode, forcing vendors to put more focus into reducing operating expenses, if they are to meet profitability goals," said Martin Reynolds, group vice president and research fellow for Gartner. "As a result, all of the major vendors have laid off workers and/or consolidated parts of their operations. This is an interesting dynamic for the industry and for customers to watch going forward, as it has the potential to negatively impact customer satisfaction both in terms of product quality and customer experience."

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.

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 10,000 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 4,600 associates, including 1,400 research analysts and consultants, in more than 80 locations worldwide. The company achieved fiscal 2000 revenues of $859 million. For more information, visit www.gartner.com.