With Double-Digit Gains, HP Asserts Dominance Over Dell In U.S. PC Market

In a contracting market, vendors have to take market share from each other in order to make gains, and in the steadily shrinking U.S. PC market, HP Inc. is coming out ahead over rival Dell.

Top Dell executives say competitors like HP are simply chasing volume sales in low price bands while Dell focuses on higher-end products and profitable sectors of the market. Dell, executives say, is focused on the global PC market, where it has enjoyed an eight-year run of market-share gains, but has also implemented a more "robust" North America plan.

Still, the U.S. accounts for about 20 percent of the global PC market, and it's a key battleground for the industry's biggest players. In the war over this ever-shrinking piece of territory, HP is making gains while Dell's share slips, according to research firm Gartner. In the first quarter, HP managed a nearly 16 percent gain in U.S. PC shipments while Dell's U.S. shipments declined more than 4 percent, Gartner said. Dell's U.S. PC shipments have exceeded HP's only once – about a year ago – since the first quarter of 2011.

Related: HP, Dell Challenge Lenovo's Worldwide Dominance In The Incredible, Shrinking PC Market

In the most recent quarter, HP was the only major PC vendor to see gains in U.S. PC shipments, according to Gartner: Its U.S. market share for the quarter was 29.1 percent, and Dell's was 26.4 percent. Dell's PC shipments increased in every region of the globe except for the U.S., Gartner said. Both the U.S. and global PC markets contracted 2.4 percent year over year, continuing a trend that has persisted for several quarters.

The intensifying PC battle has pushed Dell to make "pricing decisions" that emphasize share gains over profits, and perhaps that's a luxury Dell, as a privately held company, can afford.

According to partners, Dell has forgone price increases, even in the face of ongoing memory and SSD shortages that threaten to force PC prices higher for the remainder of 2017. The Round Rock, Texas, company has also implemented "spot pricing" in an attempt to undercut other vendors in any situation. And Dell isn't alone.

Michael Goldstein, president of LAN Infotech, a Ft. Lauderdale, Fla., solution provider that works with Dell, HP and Lenovo PCs, said HP's success in the tightening U.S. market may simply be the result of more creative pricing strategies.

"The vendors are doing OK, and we're seeing them get creative," Goldstein said. "Pricing isn't being cut, but it's not being increased. They're trying to keep things under the magic $1,000 mark. Clients haven't been complaining. Demand is there, but if I have 200 [machines] to refresh, they might have done it in batches of 50, now they're doing it in smaller batches, batches of 10. We're not seeing the volumes we've seen in the past."

"It's pretty much a race to the bottom," said Stephen Monteros, vice president at Sigmanet, an Ontario, Calif., solution provider that works with the PC market's three dominant vendors: Dell, HP and Lenovo. "It's a competitive market, and it's hard to differentiate. Any pricing move by one vendor means some sort of move by the other vendors. Dell makes a move, HP does some stuff. Lenovo has been very aggressive pricewise. Volatility in pricing is not a good thing when margins are already getting thin."

Dell's most recent fiscal quarter ended Feb. 3. HP's ended Jan. 31. In that period, HP's Personal Systems business saw a boost in revenue of 10 percent year over year to $8.2 billion and booked an operating profit of $313 million, an increase of nearly 37 percent. Dell's Client Solutions Group revenue increased 11 percent year over year to $9.8 billion, but the group's $342 million operating income represents a 29 percent decrease.

"We do believe that in a consolidating market, you have to take share, and that's our focus," Dell Technologies CFO Tom Sweet said during a recent conference call to discuss the company's quarterly results. "Obviously that needs to be profitable share," he said, noting that Dell's focus is on high-end and mobility products like its XPS, Latitude, Precision and Mobile Workstation lines.

Sweet said Dell expects the market to continue to consolidate in line with the 2 percent shrinkage it's seen in recent periods. He said it remains to be seen whether Dell's PC business gets a bump from increased adoption of the Microsoft Windows 10 operating system or new Intel processors offering boosted PC performance.

"We are thinking at some point that will happen," Sweet said. "We are optimistic about the PC market this coming year, but we're still going to be down."