PC Power Grab

Price cuts help Compaq, IBM, HP, Dell take share from second-tier players

By Bob Francis

ggressive pricing last quarter by the top-tier PC vendors had IS managers returning to familiar brands, say studies released last week by research firms.

Dataquest Inc. in San Jose, Calif., reported that domestic sales of PCs grew 21.9% in the second quarter. International Data Corp. in Framingham, Mass., reported a slightly lower figure of 19%. But both companies say worldwide sales of the top four PC vendors-Compaq Computer, IBM, Hewlett-Packard, and Dell Computer-accounted for nearly 33% of PC sales, up from 27% a year earlier.

"The big guys are taking share from the second-tier players," says Roger Kay, an IDC analyst. "We've talked about that happening for a long time, but this shows clearly that this trend is real."

Over the past quarter, those companies have brought PC prices much closer to the prices of second-tier models. IDC says the average computer price this year is expected to be $1,878, down 10% from last year. While Kay says second-tier vendors have competed primarily on price, "the top-tier vendors have taken that away from them."

The lower prices may prompt users to change their buying habits. USX Corp., which leases its PCs, is looking at purchasing some low-cost but feature-rich PCs in the future. "We like what we're seeing out there," says Eugene Trudell, general manager of IS at USX, in Pittsburgh.

The shift in market share doesn't even take into account efficient manufacturing methods the top vendors put in place late in the second quarter. That will lead to even lower prices. "With the top vendors now so close in price and offerin g better service and support than the smaller vendors, it's going to make it tough for the ASTs and Acers in the market," Kay notes.

Some smaller PC vendors say the market figures don't separate home and corporate sales. "We're focused squarely on the corporate market, so our sales don't reflect the large and growing home market. We're doing just fine," says Howard Elias, VP of marketing at Digital Equipment.

But John Brown, another IDC analyst, says the top vendors are doing even better among business customers. "We're seeing the top four take nearly half of the corporate market," Brown adds.

Also feeling the pressure was Apple Computer, which dropped out of the top five, according to IDC and Dataquest.

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