*NEWS*DELL AGAINST THE WORLD
*NEWS*DELL AGAINST THE WORLD
2006-07-28 at 11:19:00 am #16272
Dell Against the World
The Texas-based PC maker suffers while its rivals trumpet small victories. What gives?
July, 2006The PC market may be slowing, but Dell’s woes are its own. At least that’s the impression one gets from reading recent reports from analysts who watch the personal computer market.The No. 1 PC maker said during its annual shareholders’ meeting that it would, yet again, lower revenue and earnings expectations for its August 2 financial report . This comes about a year after the Round Rock, Texas-based company said it wouldn’t change strategies despite missing revenue targets .But things have been a bit rosier for Dell’s competitors. Apple, for example, posted a better-than-expected 48 percent increase in earnings this week. It also said its market share is growing .Research firms said Hewlett-Packard, the world’s No. 2 PC vendor, saw greater shipment increases than Dell for the second quarter of 2006 along with every other Dell rival. HP, which will announce its earnings in August, also has been lauded for slashing costs and improving its financials for more than a year.Despite slowing growth in personal computers , Dell’s rivals seem to be compensating. According to Gartner, Dell saw 11.6 percent growth in the second quarter of 2006 and remained in first place. However, the second- through fifth-place vendors—in descending order HP, Lenovo, Acer, and Toshiba—all saw faster growth than Dell. Indeed, Acer, which many say could soon replace Lenovo in third place, grew 34.7 percent.More significantly for Dell, HP grew faster than the market—13.8 percent compared to worldwide shipment growth of 11 percent, according to Gartner. And HP had 14.8 percent of the market, up from 14.4 percent the same quarter a year ago, and that from a company that has struggled for years to integrate Compaq. By contrast, Dell’s market share grew just 0.1 percent to 17.7 percent.
“We think HP’s execution is better than Dell’s and multiple cost savings and gross margin initiatives at HP… should protect and grow the bottom line,” Merrill Lynch analyst Richard Farmer said in a report. He continued his “buy” rating for HP shares. He also rates Apple as a “buy.”Gartner noted that Apple’s shipments in the United States increased 15.4 percent. That was about in line with most other PC makers, but far higher than Dell’s 6.3 percent U.S. growth.“Never in the history of the PC, in our view, has a vendor been better positioned than Apple is at this time to both gain share and improve profitability,” ThinkEquity Partners analysts Jonathan Hoopes and Michael Lew wrote in a research note.To be sure, Dell is maintaining its position. It is still No. 1 in the United States, which historically has been its strongest market, and remains the top PC vendor in the world. JP Morgan analysts Bill Shope and Elizabeth Borbolla noted in a report that Dell exceeded market growth in EMEA (Europe, the Middle East, and Africa)—even while HP’s growth there was slower than the market’s.Dell executives admit its problems. CEO Kevin Rollins acknowledged in a statement that the company has “faced some recent challenges.” But the company keeps banking on low prices, seeming to think that rephrasing incentives will help .Mr. Rollins has maintained that Dell’s way of doing business is still superior. But it’s getting harder to see.