Dell, HP and the PC Wars

Implications: HP maintains worldwide leadership, but Dell is staging a comeback.  HP may be able to leverage their wide array of products for an advantage.  The second-tier vendors will continue to do well in places but seem to have little chance of unseating either Dell or HP.  Apple is a dark horse poised to improve in this market.

Analysis:  HP’s resurgence over the last few years is well documented and they are now the clear market leader in worldwide PC sales.  Considering PCs were something of a loss-leader for them 3-4 years ago this represents a remarkable turnaround.  Dell in the interim has had their problems, with quality issues and declining market share.  They began their turnaround some time after HP, but appear to be seeing solid results at this point.  It is telling that Dell was able to take market share from HP in the US during the last quarter.  This sounds more like the Dell of old, rather than the stumbling giant they had become a couple of years ago.  Nonetheless, given HP’s worldwide strength it seems very unlikely that Dell will be a threat to HP on a worldwide basis.  Dell is working to enhance their footprint outside the US, but they have a long way to go to match HP.

The second tier vendors, Lenovo, Acer and Toshiba, lag both HP and Dell by a wide margin in worldwide shipments, although they are all doing well in particular areas.  Lenovo leverages their IBM heritage of engineering and quality for enterprise sales, although they frequently suffer in price comparisons.  Acer does best in Europe, and (particularly in the US) for cost-effective  consumer sales.  Toshiba is still a premium brand but is not a significant player in the US market today.

Bringing up the back is Apple, with a potential that belies their current worldwide sixth place.  Since Apple has essentially ignored enterprise sales for many years it is remarkable they are able to hold a place this high, especially with their focus on US sales.  Apple is benefiting from the current backlash, in the US especially, against Microsoft’s Vista push.  This is driving a number of Wintel purchasers into Apple’s arms, and as XP gets older and harder to obtain over the next year or so, this push is likely to intensify.

Nobody can predict how the total PC market will develop during the next six months or so.  Will the almost-recession bring about a slow-down?  Or will pent-up demand force purchases?  Most companies today are reluctant to replace PCs, yet many of their PCs are getting so old they must be replaced.  Actual corporate earnings are not terrible, so most companies have enough money they “can” replace PCs if they really need to.  There has been economic doom and gloom for long enough now that many of the companies that postponed replacing PCs will soon need to move ahead.  It seems likely that, barring a significant additional downturn in the economy, PC buying will be reasonably healthy during the latter half of 2008.

HP will certainly continue to do well.  They are on a roll and their recent market share loss in the US is probably more attributable to Dell improving rather than HP having problems.  Dell continues to recover from their problems and seems poised to gain more market share.  Apple seems very well positioned to gain 2-3 points of market share during the next 12-18 months, given Vista’s continuing problems and Apple’s heightened profile.  The other three, Lenovo, Acer and Toshiba are likely to continue to inhabit the middle area with little significant change.  No other company seems to have any chance of survival in this market.