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Dell Computer Corp. capitalized on turmoil in the maturing personal-computer market to sweep past Compaq Computer Corp. and become the world's top PC maker in the first quarter, surveys showed.

Gartner Dataquest and International Data Corp., the top two market researchers, released preliminary data on Friday showing Dell's first-quarter PC shipments grew 34.3 per cent to 4.16 million, or 12.8 per cent of the global market.

Compaq slipped to second place as growth stalled completely at 3.9 million units shipped during the first quarter, or 12.1 per cent of the market, Gartner Dataquest said. Similarly, IDC figures showed Dell slightly over and Compaq just under 4 million units.

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"In the first quarter, Dell made a lunge for the worldwide market share position," IDC computer hardware analyst Roger Kay told Reuters. "For a long time Dell has had the momentum versus Compaq. It was going to happen at some point that Dell would overtake Compaq but it happened far sooner because Dell has gotten more aggressive on PC pricing."

Dell's conquest of the top position fulfills a quest by founder Michael Dell, who started the Austin, Texas-based direct seller of computers in his college dormitory in 1984 and built it into a $31-billion (U.S.) company by last year.

Houston-based Compaq had led the industry in shipments since the early 1990s, when it overtook PC pioneer International Business Machines Corp., now the fourth-place PC vendor. Hewlett-Packard Co. is now third worldwide.

But while Dell has continued to outpace rivals with better than 30 per cent year-over-year growth, the current market leader still set plans to lay off 1,700 workers in order to shore up profit margins and boost productivity.

Meanwhile, PC maker Gateway Inc. reported a large first-quarter loss Thursday, including $533-million in charges taken to help it regain footing in the midst of a slowdown in consumer demand.

The company said it expects to return to profitability on an income-from-continuing-operations basis in the second half, after breaking even for the second quarter.

San Diego, Calif.-based Gateway said it posted a loss of $503-million, or $1.56 a diluted share, compared with a net profit of $119.6-million, or 36 cents a share, a year ago.

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The charge was taken to cut jobs and close retail stores, among other efforts to refocus the business and for write-downs of certain assets.

Excluding the slew of special charges, write-downs and a loss on a consumer loan portfolio, the company had a loss of $6-million, or a loss of 1 cent a share. Chairman and Chief Executive Ted Waitt said while the charges were higher than expected, they were part of a conscious effort to get the business back into shape.

On a units-shipped basis in the United States, Gateway remains behind Dell, Compaq and Hewlett-Packard Co., according to Gartner Dataquest.

Any celebratory mood at Dell was dampened by sobering statistics showing that the U.S. personal computer market posted negative year-to-year growth during the first quarter, marking the first such retreat since statistics started being kept in the mid-1980s.

Gartner Dataquest said its preliminary study showed a 3.5 per cent unit decline to 10.9 million units in the United States and a sluggish 3.5 per cent unit growth in the global market to 32.5 million units. The figures are well below the solid double-digit growth rates the PC industry had racked up for two decades before a sales slowdown settled in last fall.

"This is the slowest growth we've ever seen," said Gartner Dataquest analyst Todd Kort. "We feel that the U.S. economic slowdown has started to spill over into other regions."

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Weaker-than-expected growth in both the United States and Western Europe were the principal reasons for the low worldwide PC market growth, Gartner said. Together, the two regions account for almost 60 per cent of worldwide shipments.

"Asia-Pacific also evidenced widespread symptoms of a marked slowdown as U.S. imports from the region eased significantly," Mr. Kort said of the shipment statistics. "As long as these conditions persist, Dell is likely to do extremely well."

In recent years, PC makers have come to rely on notebook PC sales and moved to introduce new types of products and services - from handheld computers to printers to Internet services - to offset flagging growth in its desktop PC business. The slowdown in the U.S. economy over the past year has added to the pressures of a maturing personal computer market.

The negative growth in the U.S. market was below Gartner Dataquest's already low expectations for the quarter, which called for slightly positive growth.

"This confirms our observations over the past year that the PC market is maturing, where replacement cycles, not new shipments are the key to understanding current and future growth patterns," Mr. Kort said.

He said he now expects mid-single-digit growth for the industry - similar to forecasts made by Microsoft Corp. executives earlier on Thursday - rather than the 10-per-cent unit growth expected at the start of the first quarter.

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"It's just looking like the market will continue to be in the doldrums for another quarter or two," he said.

Dell's claim to fame is its ability to keep costs down by selling directly to customers, rather than relying on distributors or retail stores for sales.

Competitors such as Compaq and Hewlett-Packard, which rely on such indirect sales channels, were forced to contend with an inventory buildup of unsold PCs left over from the fourth quarter of 2000, forcing them to suppress shipments during the first quarter to work down the glut of inventory.

Among the top PC makers, only Dell and IBM showed positive growth in market share. NEC, the top PC maker in Japan, and Fujitsu Siemens, the second-place PC vendor in Europe, also showed mid-to-high single digit growth, Mr. Kay said.

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