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by Mike Zazaian October 19, 2006 - 2:59pm, No Comments

An array of HP digital products

After its US sales dove 7.1 percent during the last quarter, Dell has finally relinquished its spot as the world’s top PC-maker to once and future king HP.

HP claimed 17.23 percent of the international PC market in the third fiscal quarter of 2006, putting the company in the [world’s] top spot for the first time since 2003. During that same time period Dell claimed only 17.18 percent of the PC market with approximately 9,803,000 units sold, just slightly below HP’s mark of 9,831,000. Gartner analyst Mikako Kitagawa believes that Dell’s fall from grace is as much due to their own shortcomings as it is to HP’s restructuring under new CEO Mark Hurd:

HP continues to take better advantage of the faster growth segments such as the consumer market. The company’s share trajectory reflects its improvements in operational execution and changes in marketing. Dell felt the effects of the weak sales in the U.S. market, and it gave up some ground.

And while the drop doesn’t mean that Dell will remain in the cellar forever, Dell’s plummeting sales figures suggest that their downturn won’t right itself any time soon. Despite the fact that Dell currently dominates US markets with 32 percent of sales, the company lost a whopping 7.1 percent in that segment over the past year. HP, by comparison, saw its market share rise by 6.3 percent in the US, virtually claiming all of the ground that Dell had lost. HP now controls 23 percent of all US market share.

It doesn’t help that US markets, from which Dell fuels most of its business, have decreased by 2 percent overall in the past year. This is despite the fact that compared to the third quarter of 2005 worldwide PC sales are up 7 percent, with a total of 59.1 million units sold in Q3 2006.

Dell’s failures over the past year are mostly due to an image of poor customer service that has developed of late. A number of production flaws in many of its notebooks has also plagued Dell of late. The company hopes to revive its image with a move toward wider use of processors from AMD, a company which has conversely thrived over the past few years.

Whatever the outcome is for Dell one thing is for certain. As competitors close in on the once impossibly low Dell prices, Dell will have to methods other than sheer quantity of production to reclaim the crown it once had.

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