Channel Pays Off for Dell

LOS ANGELES (Reuters)—Dell Inc returned to double-digit percentage growth in global PC shipments in the fourth quarter as its new retail sales strategy began to pay off, while rival Hewlett-Packard Co's growth slowed, technology researcher IDC said on Wednesday.

Overall, global personal computer sales rose a healthy but less-than-expected 15.5 percent in the fourth quarter, and economic concerns were likely to cut into future demand, IDC said.

Dell shipped 17.1 percent more PCs in the quarter than in the year-earlier period, for a total of 11.3 million units and 14.6 percent of the global PC market, IDC said in its quarterly PC market-share survey. But Dell, based in Round Rock, Texas, remained in the No. 2 market-share spot. A year ago Dell's worldwide shipments shrank 8.4 percent, according to IDC.

In the United States, Dell sold 15.2 percent more PCs than a year earlier, well ahead of overall U.S. market growth of 8.8 percent and faster than HP's 9.8 percent.

HP kept the No. 1 market share spot with 19 percent, but growth slowed to 23.3 percent from 33 percent in the third quarter as demand slowed in Europe, the Middle East and Africa and competition increased in the United States, IDC said.

"Having struggled through the past year, Dell is starting to turn around," IDC said in a statement. "The company's rapid expansion in retail also has helped boost volume and address competition from other leading players."

Dell lost the top market-share spot to Palo Alto, California-based HP in 2006 as consumers bought more laptop computers in stores, where HP had an advantage. Dell last year abandoned its 23-year-old direct-only sales model and started selling PCs at Wal-Mart Stores Inc in the United States and Carrefour SA in Europe, among other retailers.

Dell has been expanding in retail, cutting costs and making acquisitions since founder Michael Dell returned to take the CEO position a year ago.

HP and Dell appeared to feel the impact of Taiwan's Acer Inc aggressive expansion, including the October purchase of Gateway Inc in the United States. Its PC shipments surged 60.3 percent after the Gateway purchase. Acer held 9.6 percent of the worldwide PC market, up from 6.9 percent in the fourth quarter of 2006.

Investors have been watching for signs of whether the PC market would deteriorate in the face of a possible recession in the United States, fears that were fanned on Tuesday by disappointing results from chipmaker Intel Corp.

But fourth-quarter U.S. PC unit sales rose 8.8 percent, topping IDC's 6.9 percent forecast. Researchers said global sales missed the IDC target of 16.7 percent because of relative weakness in Western Europe.

But the slowing economy was not to blame for the European deceleration. Rather, consumers slowed purchases from a PC buying frenzy in the third quarter.

Japan also recovered from recent declines, growing about 10 percent in the quarter, and notebook computers continued to drive growth world-wide.

"Fourth quarter results show a very healthy PC market," said analyst Loren Loverde in a statement. "Despite fourth quarter strength, projections for the next couple years anticipate slower growth. Rising concerns about economic growth are likely to reduce expectations further."

IDC analyst David Daoud said by phone that the industry had weathered recessions without major impact in the past. But there has been no recession since the industry had matured, he said.

"We projected a 12.2 percent growth for 2008, projections that could be challenged by the potential economic downturn, in the U.S. in particular," he said.

Recent U.S. growth was fueled by Dell's and Acer's rapid expansion, he added. Sales of Apple Inc computers surged 30.9 percent in the fourth quarter, giving it 5.7 percent of the U.S. market.

Rival researcher Gartner said that fourth-quarter global sales rose 13.1 percent, led by HP. Gartner said that Dell had shown signs of recovery at the end of the year.

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