Preliminary 4Q02 and 2002 PC Market Results

Transcription

1 Analysis Preliminary and 2002 PC Results Abstract: The worldwide PC market grew 5 percent in unit terms in the fourth quarter of 2002 compared with a year ago and 15.6 percent on a sequential basis. Hewlett-Packard regained the No. 1 position. By Charles Smulders, Mika Kitagawa, Brian Gammage, Luis Anavitarte, Lillian Tay, Ranjit Atwal, Isabelle Durand and Kanae Maita Strategic Statements The worldwide PC market in the fourth quarter of 2002 grew 5 percent in unit terms compared with a year ago and 15.6 percent on a sequential basis, indicating a market bumping along the bottom of the growth cycle. The U.S. market in the fourth quarter of 2002 grew 6.5 percent in unit terms compared with a year ago and 6.8 percent on a sequential basis. The worldwide market has shown two consecutive quarters of year-over-year PC shipment growth, and although this is a better growth picture, market demand is still at the bottom of a growth cycle and has yet to show evidence of a significant upturn. Four out of the six regions showed growth, with only Japan and Latin America declining compared with a year ago. HP pulled ahead of Dell to take the No. 1 position in the worldwide market after tying for first place in the third quarter of Faced with continuing economic uncertainty and political concerns, corporate market IT spending remained weak. Worldwide projected year-over-year unit growth for the first quarter of 2003 is 5.2 percent, equivalent to negative 7.9 percent growth sequentially. Publication Date: 17 January 2003

2 2 Preliminary and 2002 PC Results Recommendations With little evidence of a recovery in the corporate market, vendors should proceed with great caution and must have the flexibility within their business models to adapt to what Gartner Dataquest considers an asymmetric downside risk in our forecast for Industry participants should plan for worldwide unit shipment growth of about 5.2 percent in the first quarter of 2003 on a year-over-year basis, equivalent to negative 7.9 percent growth sequentially. PC vendors should characterize 2003 as another year in which their success comes from business-model innovation rather than delivering innovative technology. Worldwide Results Table 1 shows the preliminary fourth quarter of 2002 results for the worldwide PC market. Table 1 Preliminary Worldwide PC Vendor Unit Shipment Estimates, (Thousands of Units) 3Q02-3Q02 3Q02- Hewlett-Packard 6, , , Dell Computer 5, , , IBM 2, , , NEC 1, , , Toshiba 1, , Others 20, , , Total 37, , , Note: Data include deskbased PCs, mobile PCs and Intel Architecture (IA)-32 servers. If combining Fujitsu and Fujitsu Siemens, the combined shipments would be 4.1 percent, equivalent to fourth place in the worldwide PC market. HP and Compaq are reported as one company. Source: Gartner Dataquest (January 2003) A Second Consecutive Quarter of Growth The worldwide PC market in the fourth quarter of 2002 grew 5 percent in unit terms compared with a year ago and 15.6 percent on a sequential basis. The worldwide market has shown two consecutive quarters of yearover-year PC shipment growth. The suspected impact of sales delays from the third quarter of 2001 to the fourth quarter of 2001 following the events of Sept. 11 may have resulted in worldwide year-over-year growth comparisons being slightly lower than was in fact the case. However, although the growth picture has improved, market demand is still at the bottom of the cycle and has yet to show evidence of a significant upturn.

3 3 Four out of the six regions showed growth, with only Japan and Latin America declining compared with a year ago. Economic weakness continues to be the major factor determining market performance. Regional market performances were generally in line with expectations. HP Regains Its No. 1 Position Worldwide After tying for first position in the third quarter of 2002, Hewlett-Packard pulled ahead in shipment terms in the fourth quarter by a margin of about 116,000 units. The fourth quarter is consumer-focused, and HP's strong presence in the consumer market was a key factor in allowing it to retake the top spot. The fourth quarter of 2002 represented the second consecutive quarter of sequential growth for HP. Combining the two companies' (HP and Compaq) shipment histories shows that this last happened in the second half of However, year-over-year unit shipments declined 11.2 percent in the fourth quarter of HP will need to address this issueifitistoholdontotheno.1positioninfuturequarters.for example, by applying the average quarterly growth rates over the last year to the first quarter of 2002, shipment numbers shows that Dell would be slightly ahead in the first quarter of In the third quarter of 2002, Gartner Dataquest stated that the fourth quarter of 2002 would be a starting point for judging how the integration process was proceeding. Taking back the No. 1 position is significant, but more important is consistent performance over time. In that sense, the sequential results indicate an improvement, but balanced against yearover-year declines still depicts a work in progress. U.S. Table 2 shows preliminary PC shipment estimates for the fourth quarter of 2002 in the United States. Table 2 Preliminary U.S. PC Vendor Unit Shipment Estimates, (Thousands of Units) 3Q02-3Q02 3Q02- Dell Computer 3, , , Hewlett-Packard 2, , , Gateway IBM EMachines Others 4, , , Total 12, , , Note: Data include deskbased PCs, mobile PCs and IA-32 servers. HP and Compaq are reported as one company. Source: Gartner Dataquest (January 2003)

4 4 Preliminary and 2002 PC Results The U.S. PC market grew 6.5 percent year over year and 6.8 percent sequentially. The major portion of growth came from the home segment, with most vendors reporting strong sales. The year-over-year growth rate is impressive given the suspected impact of sales delays from the third quarter of 2001 to the fourth quarter of 2001 following the events of Sept. 11. However, results raise some concerns as to whether shipments to retail during the quarter resulted in sales or increased inventory. This fact may have inflated the market performance. The quarter was characterized by a highly competitive pricing environment, which will impact revenue and profitability for most vendors. Holiday sales winners were clearly Dell, which led the overall home PC market; emachines, which focused heavily on low-end deskbased PCs; and Toshiba, the first to offer desktop CPUs in notebooks. HP saw strong sequential growth, although on a combined companies' basis (HP and Compaq), year-over-year shipments would have declined by 7.3 percent. Sony underperformed partly because of the delay in bringing a desktop- CPU-based mobile product to market. Continuing the trend of previous quarters, desktop PCs did not grow as fast as mobile PCs in the home market. Mobile PCs were the hot item for the holiday season, with demand fueled by desktop-based CPU machines. High-performance gaming-type deskbased PCs saw consistent demand in the home market, although this remains a niche market. Vendors that focused on this particular market saw some gains in the home deskbased PC segment. As had been expected in the corporate market, there was little evidence of a return to buying. U.S. corporations continued to be cautious and postpone PC replacements, despite an aging installed base. The fourth quarter in general is an off season for public-sector buying. Thus, there was not strong growth in this vertical market. It is noteworthy that the government notebook market has been growing consistently even though it is still a niche market Worldwide Results It was another difficult year in 2002 for the worldwide PC industry. Shipments grew slightly at 2.7 percent compared with a 4 percent decline in 2001, but price and margin pressure continued throughout the year. In 2002, the United States grew 4.4 percent in unit terms year over year, compared with a 9.9 percent decline in The projected U.S.-led the third quarter of 2002 economic recovery did not materialize, and business confidence was further undermined by a series of accounting scandals. Faced with a high degree of uncertainty, corporations more frequently chose to extend the life of PCs rather than upgrade.

5 5 The worldwide home market outperformed the professional market, but weak home shipment numbers, particularly in the first three quarters of 2001, are significant factors in the growth rates reported. Home mobile PCs were a bright spot in this segment. The professional market showed no signs of recovery during the year. The major vendor event of the year was the completion of the HP/Compaq merger, and in ranking terms, the battle for No. 1 was between the merged companies and Dell. HP held on to the top spot for 2002 but will need to accelerate shipments in 2003 if Dell's historic growth trajectory continues. Tables 3 and 4 show the preliminary 2002 results for the worldwide and U.S. markets. Table 3 Preliminary Worldwide PC Vendor Unit Shipment Estimates, 2002 (Thousands of Units) Growth(%) Hewlett-Packard 21, , Dell Computer 20, , IBM 7, , NEC 4, , Toshiba 4, , Others 74, , Total 132, , Note: Data include deskbased PCs, mobile PCs and IA-32 servers. If combining Fujitsu and Fujitsu Siemens, the combined shipments would be 4.3 percent, equivalent to fourth place in the worldwide PC market. HP and Compaq are reported as one company. Source: Gartner Dataquest (January 2003) Table 4 Preliminary U.S. PC Vendor Unit Shipment Estimates, 2002 (Thousands of Units) Growth(%) Dell Computer 12, , Hewlett-Packard 9, , Gateway 2, , IBM 2, , Apple Computer 1, , Others 17, , Total 46, , Note: Data include deskbased PCs, mobile PCs and IA-32 servers. If combining Fujitsu and Fujitsu Siemens, the combined shipments would be in fourth place in the worldwide PC market. HP and Compaq are reported as one company. Source: Gartner Dataquest (January 2003)

6 6 Preliminary and 2002 PC Results Regional Drill-Down Table 5 shows the preliminary fourth quarter of 2002 results for the worldwide market by region. Table 5 Preliminary Worldwide PC Vendor Unit Shipment Estimates by Region, (Thousands of Units) 3Q02-3Q02 3Q02- United States 12, , , EMEA , , Asia/Pacific 5, , , Japan 2, , , Latin America 2, , , Canada 1, Total 37, , , Note: Data include deskbased PCs, mobile PCs and IA-32 servers. HP and Compaq are reported as one company. Source: Gartner Dataquest (January 2003) Europe, Middle East and Africa Preliminary estimates show that PC shipments in Europe, Middle East and Africa (EMEA) grew modestly during the fourth quarter of 2002, up 6 percent year over year and 36.5 percent sequentially (see Table 6). This improved result was driven by a strong October, although demand slowed markedly in the commercial and consumer segments during December and many retailers ended the quarter with higher-than-average inventory levels. Mobile PCs were again the main beneficiaries of growth, as the ongoing growth in demand through retail was bolstered by an upturn in commercial notebook shipments. Corporate PC purchases remained soft, with small and midsize businesses (SMBs) continuing to be the main focus of most vendor offerings. Table 6 Preliminary EMEA PC Vendor Unit Shipment Estimates, (Thousands of Units) 3Q02- Hewlett-Packard 2, , Dell Computer 1, , Fujitsu Siemens Acer IBM Others 6, , Total 12, , Note: Data include deskbased PCs, mobile PCs and IA-32 servers. Source: Gartner Dataquest (January 2003)

7 Among the leading vendors, those focused on mobile PCs achieved the highest growth rates. Acer recorded the highest shipment growth of more than 40 percent, driven by its low-cost pricing strategy and the ongoing expansion of its distribution network. Dell also recorded growth above the market average, although it continued to miss out on the strong growth in consumer PC demand outside of the United Kingdom. HP remains the region's strong market leader but saw year-over-year shipments fall by more than 10 percent with declines in the consumer and commercial segments. Its channel-rationalization program, the introduction of new terms and conditions for channel partners, and the completion of product road map transitions impacted HP's commercial shipment volume. IBM saw shipments rise in line with the market average thanks to strong growth in shipments of its ThinkPad mobile PCs, but the company will be disappointed by the much softer demand for its desktop models, which demonstrates a muted market reaction to its Think rebranding strategy. The EMEA PC market continues to be on track for recovery during late 2003, but results from the fourth quarter of 2002 show that growth rates will remain modest during the first three quarters of the year. PC shipments in Western Europe are running at similar levels to those seen during 2000, so the PC market in this part of the region has not yet returned to underlying growth. Demand in the three largest-volume markets Germany, the United Kingdom and France remains soft, and macroeconomic indicators offer little prospect of short-term rises in either IT budgets or consumer spending on PCs in these countries. Only Eastern Europe, where doubledigit shipment growth continues unabated, offers attractive opportunities for PC vendors, although the fragmentation of these emerging markets means that most of the leading brands continue to miss out. Asia/Pacific Preliminary results show that unit shipments in Asia/Pacific grew 7.4 percent in the fourth quarter of 2002 compared with a year ago and 1.7 percent sequentially. South Korea is expected to post lackluster market performance, while growth in Australia, New Zealand and Singapore will remain relatively flat compared with the same quarter a year ago. Across the region, the professional market continues to look carefully in acquiring PCs, scrutinizing the business value of the investment rather than just keeping pace with technology features. Financial year-end purchases in Singapore and Taiwan helped to stimulate purchasing activities. Vendors actively pursued the local SMB markets as multinational organizations continued to place ad hoc orders. Vendors introduced programs such as monitor and PC trade-in programs to stimulate replacement activities. The demand from the home market across the region continued, with the exception of China, where it was sluggish because of the seasonal winter months. 7

8 8 Preliminary and 2002 PC Results Mobile PC year-over-year growth rates will be a robust 32 percent vs. 3 percent for deskbased PCs. Mobile PCs are expected to take a 17 percent share of the total PC market in the fourth quarter of Price competition in the mobile PC market is heating up, causing buyers to seriously consider mobile PCs as an alternative to deskbased models. Japan Preliminary results for Japan's PC market in the fourth quarter of 2002 indicate a decline in unit shipments of 4 percent compared with a year ago. Ongoing economic troubles in Japan have continued to depress IT spending in the business sector and affect replacement demand. Many corporate buyers postponed their replacement PC purchases until at least the first quarter of 2003, the end of Japan's fiscal year. The fourth quarter of 2002 marked the sixth consecutive quarter of decline in PC growth rates. Consumer demand and replacement demand remained weak. Preliminary figures for the private market indicate seven consecutive year-over-year quarterly declines. Although year-over-year growth rates showed some improvement from the first half to the second half of 2002, from a double-digit decline to a single-digit decline, this tepid improvement is mainly attributable to weak growth in These results show no evidence of a significant upturn in demand. Latin America Preliminary results point to a 6 percent decline over the fourth quarter of 2001, slightly higher than originally forecast. The year 2002 will be remembered in Latin America not only as the toughest period for the PC industry, but as one with surprising positive results for some vendors, proving that opportunities do exist during periods of crisis. Despite the continued depressed state of the Argentinian market and the increasingly rapid deterioration of market conditions in Venezuela, IBM and Dell posted strong performances on a regional scale in the fourth quarter of Dell posted 82 percent growth over the same period in This strong growth was in part because of government sales in Mexico. Again, Brazil and Mexico accounted for more that 70 percent of regional sales. Neither market is going through its brightest period. Brazil just ended its presidential election race, and the first two weeks of 2003 just started to show some currency stability, which will have a positive impact on PC sales. Brazil is ready for a strong PC renewal cycle in the corporate environment, and clearly the competition in 2003 will be centered on the capture of these profitable accounts among the top vendors, such as IBM, HP, Dell and local Brazilian vendor Itautec. Overall, Mexico's fortunes continue to be strongly linked to the ups and downs of the U.S. economy. However, despite the U.S. uncertainties, Mexico's PC industry continues expand within its internal frontiers.

9 9 Key Factors Influencing Demand Vendor Performance Drivers PC market drivers include the following: Broadband deployment Wireless LAN deployment in home and public hot spots Desktop-to-mobile transition Transportable PCs desktop-cpu-based mobiles Liquid-crystal display (LCD) monitors Price declines Inhibitors PC market inhibitors include the following: Economic weakness Uncertainty surrounding U.S.-Iraq developments saturation in the United States and Western Europe Life-cycle extension Lack of compelling killer applications DVD standard wars Budget competition from other devices Dell Dell performed as follows: Dell grew 24.5 percent year over year in the worldwide market, outpacing all other international vendors. Growth was strong across all regions. Dell's focus on improving its international operation performance continued. Its most notable improvements were in Asia/Pacific, Japan, and Latin America. Dell launched OptiPlex SX 260, its first small form factor product without expansion slots. The machine was originally introduced in Japan. The product did quite well across all regions. Hewlett-Packard HP performed as follows: HP regained the No. 1 position worldwide and posted its second quarter of sequential growth but saw year-over-year unit shipments fall 11.2 percent.

10 10 Preliminary and 2002 PC Results HP continued to reorganize, consolidate and refocus the combined PC entities and its channel strategy. HP launched the Compaq Tablet PC TC1000 based on Transmeta's Crusoe processor. IBM IBM highlights include the following: IBM recently appointed a new head of its Personal Systems Group. Stephen M. Ward Jr. replaces Robert Moffat, who will focus solely on IBM's Integrated Supply Chain. On 7 January 2003, IBM announced a three-year, $3.6 billion agreement with Sanmina SCI to take over the manufacturing and customization of some PCs and low-end and midrange servers. IBM also announced a three-year, $120 million agreement with Solectron, which will take over IBM's Global Asset Recovery Services facility for refurbishing old PCs. IBM expects to close both deals in February On 1 November, IBM's Personal Computer Division (PCD) launched its worldwide Think branding strategy, a solution-based strategy comprising the three main offerings Think Offering, ThinkVantage Technologies and ThinkVantage Design and Think Accessories. NEC NEC performed as follows: NEC shipments in Japan in the fourth quarter of 2002 were slightly lower than the same period a year ago. The company struggled to maintain its position in the consumer market. The company introduced new concepts such as the "family type PC," but it did not take full advantage by supporting it with a major sales drive. Also, initial shipments of LCD all-in-one desktops were delayed. NEC experienced some improvement of its business in the Japan professional market, showing slight year-over-year shipment growth. In Europe, NEC-CI saw flat results overall. In the retail market, the company struggled to maintain the same shipment volume compared with 2001 and experienced severe pricing pressure at the end of the fourth quarter. The quarter marked the end of the Employee Purchase Program contract with EDF in France, which accounted for few units. In the United Kingdom, the company experienced low sales with Dixons. NEC-CI showed strength in retail notebooks. Corporate shipments overall grew. The focus is on four countries (the United Kingdom, France, Belgium and the Netherlands) where the company has dramatically increased its sales force. However, U.K. corporate sales declined compared with same period in 2001 because of abigdealayearago.

11 11 Toshiba Toshiba highlights include the following: Toshiba launched its Tablet PC, designed totally by a U.S. team, which won the Best of COMDEX and a number of other awards. Toshiba was the first vendor to ship notebooks with DVD-rewritable drives and the first notebooks to ship with a/b dual-band capability. Toshiba continued to lead the U.S. home notebook market with desktop-cpu-based machines, growing its shipments at a double-digit rate compared with a year ago. emachines emachines performed as follows: For the first time, emachines was ranked within the top five U.S. vendors. The company was strictly focused on low-end desktop PCs, targeting the home market. Following a difficult period after the home market collapse in the fourth quarter of 2000, the company's management team was replaced with one with a background in retail. Since then, emachines has regained market share in the U.S. retail space by maintaining close working relationships with retailer partners and positioning itself as the low-price leader. Key Issue Who are the key players in each computing hardware platform market, and what are their rankings?

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