Gartner Says Lower Prices Drive Worldwide PC Shipments to 11 Percent Growth in Second Quarter of 2006

STAMFORD, Conn., July 19, 2006 — Driven by price cuts, worldwide PC shipments totaled 54.9 million units in the second quarter of 2006, an 11 percent increase from the same period last year, according to preliminary results by Gartner, Inc.

Central processing unit (CPU) inventory clearance activity by Intel, and generally more aggressive pricing by Intel and AMD attributed to lower prices in the quarter. The impact of the CPU price decline varied among regions. In the United States and Asia/Pacific, the cuts boosted shipments, while in Europe, Middle East and Africa (EMEA) where there remains higher than normal finished goods inventory, shipments were adversely impacted.

“On a worldwide basis, large vendors continued to gain share at the expense of mid-tier vendors and system builders,” said Charles Smulders, vice president of Gartner’s Client Computing Group. “The price cuts during the quarter undoubtedly helped the large vendors, as they were able to put more pricing pressure on the smaller players. Intel’s accelerated ramp on its new CPU lines will expose those vendors who have not invested enough in tools and processes to manage their supply chain.”

In the second quarter of 2006, the top 5 vendors accounted for nearly 50 percent of the worldwide PC market (see Table 1). These vendors all grew faster than the overall industry average. Dell maintained its No. 1 position in worldwide PC shipments, as it continued to grow much faster outside the United States. Hewlett-Packard continued to show strength in the worldwide market, backed by solid consumer growth, mainly in mature markets.

Table 1
Preliminary Worldwide PC Vendor Unit Shipment Estimates for 2Q06 (Thousands of Units)

Company	2Q06 Shipments	2Q06 Market Share (%)	2Q05 Shipments	2Q05 Market Share (%)	2Q06-2Q05 Growth (%)
Dell	9,730	17.7	8,717	17.6	11.6
Hewlett-Packard	8,107	14.8	7,126	14.4	13.8
Lenovo	3,994	7.3	3,518	7.1	13.5
Acer	2,836	5.2	2,105	4.3	34.7
Toshiba	1,906	3.5	1,496	3.0	27.4
Others	28,338	51.6	26,520	53.6	6.9
Total	54,911	100.00	49,482	100.0	11.0

Note: Data includes deskbased PCs, mobile PCs and X86 servers.
Source: Gartner Dataquest (July 2006)

The PC market in the United States grew 6.4 percent, as shipments reached 16.6 million units in the second quarter (see Table 2). Dell grew at the industry average in the United States, and this performance was much better than the first quarter. Dell’s focus on service and support, and adoption of a more aggressive pricing strategy were key factors in its better performance. HP had much faster growth than the U.S. industry average due to strong consumer shipments.

“The consumer market continued to lead the U.S. PC market, as mobile PC shipments remained strong. Accelerated price declines associated with the CPU oversupply stimulated additional mobile demand,” said Mikako Kitagawa, principal analyst for Gartner Dataquest’s Client Computing Markets Group. “The professional market experienced slow growth mainly due to the sluggish sales in the large enterprise market, however the small business market continued to grow steadily.”

Table 2
Preliminary U.S. PC Vendor Unit Shipment Estimates for 2Q06 (Thousands of Units)

Company	2Q06 Shipments	2Q06 Market Share (%)	2Q05 Shipments	2Q05 Market Share (%)	2Q06-2Q05 Growth (%)
Dell	5,302	32.0	4,988	32.0	6.3
Hewlett-Packard	3,127	18.9	2,713	17.4	15.2
Gateway	1,035	6.2	890	5.7	16.3
Apple Computer	766	4.6	663	4.3	15.4
Lenovo	639	3.9	607	3.9	5.3
Others	5,717	34.5	5,724	36.7	-0.1
Total	16,587	100.00	15,585	100.0	6.4

Note: Data includes deskbased PCs, mobile PCs and X86 servers.
Source: Gartner Dataquest (July 2006)

In the Europe, Middle East and African (EMEA) region, PC shipments totaled 16.7 million units in the second quarter of 2006, a 7 percent increase from the same period last year.

Table 3
Preliminary EMEA PC Vendor Unit Shipment Estimates for 2Q06 (Thousands of Units)

Company	2Q06 Shipments	2Q06 Market Share (%)	2Q05 Shipments	2Q05 Market Share (%)	2Q06-2Q05 Growth (%)
Hewlett-Packard	2,731	16.4	2,569	16.5	6.3
Dell	2,186	13.1	1,960	12.6	11.5
Acer	1,628	9.8	1,334	8.6	22.1
Fujitsu/Fujitsu Siemens	1,087	6.5	1,077	6.9	0.9
Toshiba	670	4.0	483	3.1	38.9
Others	8,374	50.2	8,155	52.4	2.7
Total	16,676	100.00	15,578	100.0	7.0

Note: Data includes deskbased PCs, mobile PCs and X86 servers.
Source: Gartner Dataquest (July 2006)

"For the first time since the first quarter of 2003, the region experienced a single digit growth. The vendors seemed in denial of this cyclical downward trend and few had enough flexibility in their business models to adequately adjust to rapid market dynamics change,” said Ranjit Atwal, principal analyst for Gartner's computing platform group in EMEA.

The slower growth was exaggerated by the vendors and the channel trying to reduce high PC inventory positions as well as working to ensure Restriction of Hazardous Substances (RoHS) recycling directive compliance. The inventory build up in the distribution channels had been apparent for a year but neither the vendors nor the distributors took enough action to deal with the problem, leaving the vendors with difficulties shifting inventory in a weaker market.

The consumer market experienced good growth in mobile PCs but was subdued by negative growth in the desk-based market. Price erosion will continue unabated and, combined with Intel’s early price cuts being matched by AMD, Gartner anticipates the market will reach double-digit growth in both segments.

After three quarters of positioning itself ahead of the market growth average, Hewlett-Packard’s results this quarter were below the market growth average, whereas Dell grew above the market growth average with good professional notebook growth. This was due in part to Dell’s aggressive pricing strategy on dual core products which also led to greater success in the SMB segments.

Asia/Pacific and Latin America continued to be the regions with the strongest growth rates. The Asia/Pacific PC market grew 22.5 percent, as shipments reached 12.4 million units in the second quarter. The region was driven by mobile PC shipments which increased 48 percent in the quarter compared to the same period last year.

Latin America PC shipments increased 27 percent in the second quarter with shipments totaling 4.2 million units. Local-branded vendors experienced accelerated growth due to their strong retail presence and their participation in low cost PC programs.

In Japan, PC market growth was nearly flat as shipments reached 3.5 million units in the second quarter, a 0.5 percent increase from the same period last year. Negative consumer growth was offset by stronger sales in the professional market.

These results are preliminary. Final statistics will be available soon to clients of Gartner'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 408-468-8000. Additional research can be found on Gartner's Computing Hardware section on Gartner's Web site at http://www.gartner.com/it/products/research/asset_129157_2395.jsp.

Contacts:


Christy Pettey
Gartner
+1 408 468 8312
christy.pettey@gartner.com

Laurence Goasduff
Gartner
+ 44 1784 267 195
laurence.goasduff@gartner.com


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