Poor commercial demand, affecting vendors such as Dell and Lenovo led to unseasonably weak performance. However, the consumer notebook market was solid, essentially benefiting vendors active in the retail sector.

While Europe, Asia/Pacific (excluding Japan), Canada, and Latin America continued to grow at a healthy clip, PC shipments in the United States and Japan continued to decline. Slowing commercial sales constrained the growth of some market leaders and had a significant impact on the U.S. and Japanese markets.

Worldwide PC shipment growth of 8.7% brought quarterly shipments to 65.6 million for the quarter. This was down from 9.1% growth in the third quarter and 1.4% below a forecast of 10.1% growth for the fourth quarter. For all of 2006, PC shipments reached 228.6 million with growth of 10.0% compared to growth of 16% in 2005 and a forecast of 10.4% for 2006.

"This was a busy quarter, with the release of Vista for commercial users and the pending release for consumers on top of the ongoing transition to Portables and a generally slowing market," said Loren Loverde, director of IDC's Worldwide Quarterly PC Tracker. "Add to that the changing pricing environment and segment dynamics and it was a very challenging quarter. HP clearly was able to capitalize on the situation, solidifying its lead in worldwide quarterly shipments with a 3.4% share advantage over Dell, but it also reflects underlying pricing and segment trends that were tough on competitors such as Dell, Lenovo, Gateway, and Fujitsu-Siemens."

As Dell updates its strategy, it saw fourth quarter shipments fall year on year and sequentially in the United States and worldwide. Nevertheless, the company maintained its number one position in worldwide shipments for all of 2006, though by a narrow margin. Meanwhile, companies such as HP, Acer, Toshiba, and Apple benefited from a combination of strong retail and consumer sales, portable PC adoption (notably in the consumer segment), and aggressive pricing. From this perspective, it does not appear that the January release of Vista's consumer version had a big impact on fourth quarter shipments, but it remains to be seen if the consumer drivers will remain strong in the first half of 2007.

"The U.S. market displayed an unseasonably weak performance, largely attributed to poor commercial demand, affecting vendors such as Dell and Lenovo," said David Daoud, manager of Personal Computing and PC Tracker Programs at IDC "However, the consumer notebook market was solid, essentially benefiting vendors active in the retail sector. The channels were also relatively healthy, taking advantage of low component prices and healthy demand in the SMB segment."

US Market Outlook

The United States slogged through another slow quarter as consumer demand remained weak and commercial demand slowed considerably. HP had a huge quarter, leveraging strong retail and commercial business to grow shipments nearly 16% while the rest of the field struggled. Where a year ago Dell had nearly a 13% share lead, HP trimmed that to just 3.9% in the fourth quarter. While Lenovo continues to struggle with declining volume, and Gateway shipments were essentially flat once again, Dell revealed its vulnerability, with shipments falling precipitously under HP's continued pressure.

Vendor Highlights

HP built on its third quarter momentum, boosting year-on-year growth to nearly 24% (the fastest for HP since 2000) and taking a clear lead in worldwide shipment volume for the quarter. Growth in the United States rebounded to near 16% from a dip to single digits in the third quarter, while international growth surged above 28% with a strong showing in EMEA.

Dell was unable to recover from a slow third quarter and stumbled through the end of the year. Shipments to the U.S. market, which continue to represent over 50% of Dell volume, were down nearly 17% year on year following a single-digit decline in Q3. In addition, international growth, which was reasonably stable in the third quarter, fell to just 1.5% in 4Q06 with notably slower growth in all regions. Dell's focus on profitability over share is coming right at a time of aggressive competition from companies such as HP, Acer, and Apple, and is compounded by a slow commercial market. As a result, Dell is in the unusual circumstance of seeing volume decline sequentially from the third quarter in both the United States and worldwide.

Lenovo continues to benefit from its leadership position in Asia/Pacific, while struggling for traction in other regions. The company continues to gain share in APeJ, which accounts for nearly 60% of volume, while shipments declined in the United States and Japan, and modest volume gains in other regions were not enough to preserve share.

Acer had another solid quarter with strong gains in all regions. EMEA represents roughly 70% of Acer's worldwide shipments, and grew by nearly 37% in the fourth quarter, but expansion in the United States and Asia/Pacific (excluding Japan) also contributed to the company's gains.

Toshiba's focus on portable PCs continues to give the company an edge in overall growth. Worldwide shipments were up more than 17% in the fourth quarter, with an increase of more than 14% in the United States. Although growth was slower than last quarter, and closer to market rates for portable PC shipments, Toshiba continues to gain share in total shipments and benefits from the higher margins for portable PCs.

Gateway had another slow quarter interrupt a run of growth in 2005 and the first half of 2006. Slower growth in the small and medium business segments in the United States as well as more competition in the consumer segment constrained growth, though performance was still ahead of the overall U.S. market.

Apple saw another quarter of very solid growth as the company combined new portable products with strong retail sales and positive press following a successful transition to Intel processors. Worldwide and U.S. shipments were each up roughly 30% year on year. The company also continues to benefit from its music business and new developments such as the iPhone will not only drive more positive press and buyer interest, but further expand the number of people using at least one Apple product who may come into the Apple fold.