HP gains and Dell wanes as slow commercial demand stunts U.S. PC growth: IDC 18 January, 2007 By Liam Lahey

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Nevertheless, Dell maintained its number one position in worldwide shipments for all of 2006, though by a narrow margin. Meanwhile, companies such as HP, Acer, Toshiba and Apple benefited from a combination of strong retail and consumer sales, portable PC adoption (notably in the consumer segment), and aggressive pricing. From this perspective, it does not appear that the January release of the Microsoft Vista OS consumer version had a big impact on fourth quarter shipments, but it remains to be seen if the consumer drivers will remain strong in the first half of 2007, the report read.

"It helps any company with a diverse channel position to take advantage of any market growth wherever and whenever it happens, and there's less risk involved when growth declines," said David Daoud, analyst, personal computing and PC tracker programs for IDC in Framingham, Mass. "A multi-channel approach to the market is absolutely critical. It's good to have a healthy direct model also, but clearly a strong retail presence, channel and distribution presence; these things are critical."

Dell's decline is attributed to slow commercial sales (which affected Dell particularly in the U.S.), the company's increasing focus on profitability, its' relative absence from retail, the infamous notebook battery recall, and generally poor execution (it seems unfathomable that Dell would choose to give up so much in pursuit of higher profitability).

IDC's "Q4 2006 PC Market and Vendor Performance" also stated Lenovo, Fujitsu-Siemens, and Gateway was affected by slow commercial demand.

HP's gains are attributed to a complete channel, including a strong presence in retail (notable for sale of consumer portables), the aggressive pursuit of consumers even at the low end, and solid execution. Acer, Apple, and Toshiba also saw impressive gains for some of the same reasons.

Daoud told eChannelLine it remains to be seen if the North American commercial PC market would pick up anytime soon. He said the challenge for the PC industry is not limited to one company or its' chosen business model, but how for the industry itself to create market momentum?

"The reality is the PC market is growing at a very slow pace or decelerating in most global regions," he said. "If you look at the U.S., the year-on-year growth rate is minus-0.5 per cent in Q406. Its true growth rates, from quarter to quarter, can go from negative percentages to high single-digit growth. But 2007 could indeed be a very tough market and we could see some industry-wide shrinkage mostly due to poor desktop PC demand."

Worldwide PC growth came in at 8.7 per cent (below Q306 growth of 9.1 per cent and the Q406 forecast of 10.1 per cent). The U.S. and Japan were roughly three per cent behind forecast.

"Companies might be doing double-digits in mobility growth but it hasn't been enough to affect the weakness in the desktop market," he added. "There are expectations the release of the Vista OS would bring about a new refresh cycle, but it'll be slow going as consumers tend to take time to understand the value of upgrading their PCs.

"We do believe there's enough technological innovation from the Vista OS to hardware to content that will lead consumers and businesses to refresh their systems . . . we could see that momentum begin in the second half of 2007."