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Dell Falls Behind in PC Race

ROUND ROCK, Texas ( TheStreet) -- PC makers had a surprisingly strong fourth quarter. Not so surprisingly, Dell (DELL - Get Report) did not.

For four of the top five PC makers, price cuts, the new Microsoft (MSFT) Windows 7 operating system and growing demand in China all contributed to a blowout quarter, said analysts. The magnitude of strength in PC sales last quarter was the real surprise, UBS analysts wrote in a research note Thursday.

Hewlett-Packard (HPQ - Get Report) expanded its lead as the top shop by adding more than a percentage point of the market to its share. And Acer surged to the No. 2 slot mostly because of the popularity of its laptops.

The standout player, bearing the distinction of the sole decliner among the top five brands, was Dell. The PC giant fell to No. 3 globally last year amid heavy competition and a punishing two-year transition of its business strategy.

Once the PC leader heralded for its direct sale, build-to-order approach, Dell has since adopted a bigger retail focus and an outsourcing manufacturing plan that has not delivered on its turnaround promise.

According to an IDC report cited by UBS, Dell lost more than a percentage point of its worldwide market share in the fourth quarter compared to the same period a year ago. Even worse, Dell's grip on its home market was even weaker. Dell's U.S. market share fell four percentage points to 22% in the most recent quarter.

To help offset the decline in its PC stature, the firm has been pushing in new directions. Last year Dell made a $3.9 billion deal for Perot Systems to boost its IT services efforts.

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