We're not expecting a turnaround until Christmas at best

Todd Kort Gartner Dataquest

And the decline of the industry is intensifying the relentless war for market share between sellers.

While Dell, the world's leading personal computer (PC) maker, saw its second-quarter sales increase 13%, Hewlett Packard suffered a 18.8% fall, according to initial estimates from Gartner.

Dell comforted investors when it confirmed that it was still on course to meet profit targets, but was slashing costs in order to survive the sluggish demand.

Slow replacement buying

PC purchases were down 1.9% to 30.4 million units in the second quarter compared with 31 million units in the same three months the year before.

The largest falls are thought to have been in the United States which accounts for nearly 40% of the world's PC market.

Q2 sales of top four PC makers

Dell +13% Compaq -14.4% IBM -6.5% Hewlett Packard -18.8% Source: Gartner Dataquest

But initial indications show that the Western European market - which makes up 20% of the world's demand for PCs - is also likely to have fallen into negative growth in the second quarter.

Businesses have been avoiding replacing personal computers as part of a wave of slowdown-provoked cost cutting.

And the surge of home computer buying happened too recently for consumers to start updating existing models.

Asia's revival hopes

Hopes of better market conditions are gradually being postponed.

"Now we're not expecting a turnaround until Christmas at best," said Todd Kort at Gartner Dataquest.

Earlier this year, Gartner had anticipated that the PC market would begin to recover during the third quarter of the year.

Asia is one of the few bright spots of computer sales, with Japan's PC market expected to have grown 5% during the second quarter, and Asia as a whole rising 9%.

Stiff competition

Dell was the only one among the major PC makers to increase sales in the second quarter in what Michael Dell called "a dramatic shift in market share towards Dell".

Dell took over as the world's leading PC maker from Compaq during the first thee months of this year.

It has gained market share in a stagnant market by aggressive pricing.

But its competitors are suffering as a result, with second quarter sales at Compaq down 14.4% and IBM down 6.5% according to Gartner's initial estimates.