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AnonymousInactiveDell 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.Better Execution
“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. -
AuthorJuly 28, 2006 at 11:20 AM
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