By Michael Cohn

Hewlett-Packard gained in its lead over Dell in the worldwide PC sales market, according to two studies, while Apple also garnered more adherents to the Mac alternative.

Studies released Wednesday by the research firms IDC and Gartner both showed worldwide shipments of PCs growing in the fourth quarter of 2006, with HP out in front of the market.

Computer makers have been duking it out for the top spot in the PC market while facing fresh challenges from Apple. The Cupertino, California-based company has received a substantial halo effect from its iPod sales while capitalizing on its deal with Intel to sell computers that can run both Mac OS X and Windows XP.

However, Apple’s latest earnings numbers released late Wednesday sent its shares tumbling Thursday despite strong iPod sales. Investors were disappointed with the guidance Apple provided for its upcoming Mac sales (see Apple Profit up 78 Percent).

Apple Profit up 78 Percent

Shares of Apple plummeted $3.82 to $91.13 in recent trading, while in a different kind of halo effect HP shares dropped $0.50 to $41.99 and Dell shares fell $0.46 to $25.38.

IDC put the rate of growth for worldwide PC sales in the fourth quarter at 8.7 percent, while Gartner figures were a more modest 7.4 percent compared to the fourth quarter of 2005. IDC said 65.6 million units had shipped, while Gartner claimed 67.3 million.

Price Erosion

However, IDC saw a slowdown from the third quarter when sales grew 9.1 percent. IDC had forecast growth in the fourth quarter of 10.1 percent.

“Price pressure on the PC side is really strong,” said Mikako Kitagawa, principal analyst for Gartner Dataquest’s client computing markets group. “Vendors really have to lower the price. Dell may not want to play in that particular area of lower-end consumer machines to keep the margin level. But it’s too early to say why Dell did not increase the margin share this time.”

The release later this month of Windows Vista to the consumer market should give PC sales a boost, though. At least that’s what computer makers hope will happen.

Gartner noted that in the consumer market, the PC industry battled for wallet share against other consumer electronics products, including game consoles and flat panel TVs.

IDC also noted the effects of the generally slowing market, despite the release of Vista to enterprise customers in late November (see Microsoft Launches Vista).

Microsoft Launches Vista

Both firms found that Palo Alto, California-based HP was able to capitalize on the pricing battle. IDC found that HP solidified its lead in worldwide quarterly shipments with a 3.4 percent share advantage over Round Rock, Texas-based Dell.

According to Gartner, HP’s worldwide PC shipments in the fourth quarter increased 23.9 percent, as its market share totaled 17.4 percent.

Dell remained in the No. 2 position in the quarter, but its shipments decreased 8.7 percent, resulting in a market share of 13.9 percent.“HP has a more diverse channel position as opposed to Dell, which focused almost exclusively on the direct channel,” said David Daoud, research manager at IDC. “Building relationships with end users works very well, but it gets difficult when the direct buyers are saturated in terms of IT purchasing, especially with desktops, which has been a strength for Dell for years.”

He noted that companies like HP, Sony, and Toshiba are able to benefit in the holiday season when many shoppers head to retail stores like Best Buy and CircuitCity to find heavily promoted bargain PCs.

CircuitCity

U.S. Sales Slowing

In the United States, where consumer demand remained weak and commercial demand slowed down, HP had a huge quarter, leveraging strong retail and commercial business to grow shipments nearly 16 percent, according to IDC, while the rest of the field struggled.

United States

A year ago Dell had nearly a 13 percent share lead, IDC noted, but HP trimmed that to just 3.9 percent in the fourth quarter in the U.S.

U.S.

Lenovo, however, continued to struggle with declining volume in the U.S. Gateway shipments were essentially flat again. And Dell shipments plunged under continued pressure from HP, said IDC.

Despite its conservative outlook for the upcoming quarter in terms of Mac sale, Apple was a big success last quarter, with solid growth over last year. The company combined its new portable products with strong retail sales following a successful transition to Intel processors. IDC noted that Apple’s worldwide and U.S. shipments rose roughly 30 percent year over year.

U.S.

“They’ve done well because they have a nicely balanced product portfolio that caters to a large buyer community,” said Mr. Daoud.

He noted that Apple’s market share in the U.S. has reached 4.77 percent, compared to 3.6 percent last year. Apple’s computer sales contracted a bit from the third quarter, but that’s because the third quarter has traditionally been the strongest quarter for Mac sales because of the back-to-school season.

U.S.

“There has been a certain degree of impact from their iPod success and a run rate of 20 million more per quarter in terms of sales,” said Mr. Daoud. “No doubt that success will bleed into other business segments.”

“Apple itself is not going to be that much of a threat to Windows,” she said. “I don’t believe that.”However, Ms. Kitagawa of Gartner does not think Apple will steal much market share from the Windows PC vendors.

However, Ms. Kitagawa of Gartner does not think Apple will steal much market share from the Windows PC vendors.

Still, Apple is certainly benefiting from music and video sales via its iTunes service while drawing in users who want a better way to use their iPods with their computers. Expectations for the June release of the iPhone are fueling buyer interest even more as well as expanding the number of PC people coming into the Apple fold.

Top 5 Vendors, Worldwide PC Shipments, Full Year 2006 (Preliminary) (Units Shipments are in thousands)

Rank	Vendor	2006Shipments Shipments	MarketShare Share	2005Shipments Shipments	MarketShare Share	2006/2005Growth Growth
1	Dell	39,098	17.1%	37,755	18.2%	3.6%
2	HP	38,842	17.0%	32,575	15.7%	19.2%
3	Lenovo	16,619	7.3%	12,979	6.2%	28.0%
4	Acer	13,581	5.9%	9,845	4.7%	37.9%
5	Toshiba	9,177	4.0%	7,234	3.5%	26.9%
Others	111,267	48.7%	107,450	51.7%	3.6%
All Vendors	228,583	100.0%	207,837	100.0%	10.0%

Note: Shipments include shipments to distribution channels or end users. OEM sales are counted under the vendor/brand under which they are sold. PCs include desktop, notebook, ultra portable, and x86 servers. PCs do not include handhelds. Data for all vendors are reported for calendar periods.

Source: IDC, January 17, 2007

Preliminary Worldwide PC Vendor Unit Shipment Estimates for 4Q06 (Thousands of Units)

Company Company	4Q06 Shipments	4Q06 Market Share (%)	4Q05 Shipments	4Q05 Market Share (%)	4Q06-4Q05 Growth (%)
Hewlett-Packard	11,687	17.4	9,431	15.0	23.9
Dell Inc.	9,385	13.9	10,284	16.4	-8.7
Lenovo	4,773	7.1	4,365	7.0	9.3
Acer	4,593	6.8	3,451	5.5	33.1
Toshiba	2,576	3.8	2,070	3.3	24.5
Others	34,339	51.0	33,085	52.8	3.8
Total	67,352	100.0	62,686	100.0	7.4

Note: Data includes desk-based PCs, mobile PCs, and X86 servers.Source: Gartner Dataquest (January 2007)