updated 10/18/2006 8:05:10 PM ET 2006-10-19T00:05:10

Hewlett-Packard Co. supplanted Dell Inc. as the world leader in personal computer shipments during the third quarter, returning the bragging rights to Silicon Valley for the first time in nearly three years, according to figures released Wednesday by two influential research firms.

Both Gartner Inc. and IDC pegged the overall third-quarter growth of the global PC market at just under 7 percent, but that trend was overshadowed by the industry's new pecking order.

The changing of the guard occurred after HP's shipments climbed by 15 percent from a year ago while Dell's edged up by less than 4 percent.

By Gartner's measure, Palo Alto-based HP shipped 110,000 more PCs than Dell to give it a 16.3 percent share of the global market compared to 16.1 percent for its Round Rock, Texas-based rival.

It marks the first time since 2003's final quarter that HP — now the world's largest technology company — has held the top spot. HP expanded its PC business in 2002 with its $19 billion acquisition of Compaq Computer Corp. — a deal engineered by HP's former chief executive, Carly Fiorina, who is now touting her accomplishments in a new memoir.

IDC calculated things differently, but also agreed HP holds a narrow lead in the global market. Although HP shipped 28,000 more PCs than Dell during the quarter, IDC pegged both companies market share of the worldwide market at roughly 17 percent.

Dell retained a substantial lead in the U.S. market, where its dominance of the corporate market gives its a major advantage, analysts said.

Nevertheless, HP also narrowed the gap in the United States, where its market share stood somewhere between 22 and 23 percent. Dell's hovered between 31 and 32 percent, according to the research firms.

Both PC makers recently have been battling image problems brought on by embarrassing incidents.

HP has been rocked by revelations of the shady tactics that investigators deployed in a cloak-and-dagger operation designed to plug a boardroom leak. The subterfuge included obtaining personal phone records under false pretenses — a scheme that culminated in congressional hearings and criminal charges against five people, including HP's former chairwoman.

The scandal, which erupted in early September, apparently didn't deter the sales momentum that HP has been building since Mark Hurd became chief executive during the spring of 2005.

"HP continues execute well by taking advantage of the high-growth markets, particularly the consumer market," said Charles Smulders, a Gartner vice president.

In August, Dell recalled 4.1 million notebook computer batteries made by Sony Corp. because they can overheat and catch fire. That recall probably wasn't a major factor in Dell's lackluster third quarter because desktop computer shipments accounted for most of the weakness, analysts said.

All the other major PC makers also picked up market share at Dell's expense in the third quarter. China's Lenovo Group Ltd. remained third in the worldwide PC market with a roughly 8 percent share, followed by Taiwan-based Acer Inc. at 6 percent and Japan's Toshiba Corp. at 4 percent.

In the United States, Apple Computer Inc.'s shipments rose by more than 30 percent from last year, reflecting strong back-to-school demands for its notebooks. The Cupertino-based company, which has become better known for its ubiquitous iPods, ended the quarter with a 6 percent share of the U.S. market.

Dragged down by Dell, overall PC shipments fell by roughly 1 to 2 percent in the United States, according to Gartner and IDC. It was the first time since the second quarter of 2002 that U.S. PC shipments fell.

The PC industry's outlook for the crucial holiday shopping season remains muddy because Microsoft Corp.'s new operating system, the widely anticipated Vista, won't be sold to consumers until January.

Loren Loverde, director of IDC's worldwide quarterly PC tracker, won't necessarily discourage consumers from buying new computers during the fourth quarter because retailers are expected to slash prices to clear their shelves for the arrival of the new Vista-powered systems.

"Consumers who don't mind buying a computer with Windows XP are going to get some very good deals," Smulders agreed.

Copyright 2006 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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