HP vs. Dell: Showdown at the Windows 7 upgrade corral

HP vs. Dell: Showdown at the Windows 7 upgrade corral

Summary: Here's a tale of two PC titans: HP and Dell. One executes well every quarter. The other doesn't. Both see big PC upgrade cycles ahead. Both are looking to ride a bump in enterprise spending courtesy of Windows 7. Place your bets.

SHARE:

Here's a tale of two PC titans: HP and Dell. One executes well every quarter. The other doesn't. Both see big PC upgrade cycles ahead. Both are looking to ride a bump in enterprise spending courtesy of Windows 7.

Place your bets.

As enterprises ponder the PC upgrade cycle and a move to Windows 7 tech executives are likely to have two primary vendors pitted against each other: HP and Dell.

The earnings conference calls from HP and Dell were very similar. Both talked services. Both talked upgrade cycles. And both talked up Windows 7 (see HP and Dell's financial results).

HP CEO Mark Hurd said Monday on the company's fiscal fourth quarter conference call:

The personal systems group also delivered in Q4, extending its market leadership by more than a full point yet again. We saw good consumer acceptance of Windows 7, particularly in the U.S. Given that we gained double-digit points of market share in U.S. enterprise and have claimed the top market position, we are well-positioned to win when corporations upgrade to Windows 7. PSG delivered healthy operating margins despite increasing commodity costs.

Dell CEO Michael Dell also was bullish about Windows 7---and also saw component costs rise. He said a week ago that PC growth could be in the mid-teens:

I think there is an aging installed base for sure. You just have an accumulation of new technologies at the hardware, software, virtualized client and these IT managers really know they cannot extend the life of these client assets forever. While I don’t think it is all going to occur at once, I think it will be a rolling refresh that occurs over perhaps 18 months, I can’t remember a time when a very high percentage of them skipped an entire operating system.

And Hurd and Dell sounded like long-lost twins about the corporate upgrade cycle too. Here's Dell:

We think we are holding or gaining share in the right kind of price points. Our efforts on the cost side should expand our ability to profitably compete in a larger portion of the price points. What I would also tell you is that the pipeline of client opportunities we are already seeing more client activity in the last 30-60 days than we have in a long time and the pipeline for client activity kind of going forward into next year is the strongest it has been in a long time as well. So if I look at our commercial businesses the second quarter was kind of a bottom. The third quarter was certainly better. October was the best and November will be better than October.

Here's Hurd's at bat as he references HP's share gains and the corporate upgrade cycle:

I think it is important to note we don’t usually start with an objective of gaining share. It's more the result of us just trying to do the right work for the customer and I think as we mentioned a couple of times, we have increased our sales coverage, which we think is part of the reason that you have seen this performance occur as it has. Second, we've worked really hard to work on our service experience and the service experience is a really big deal, So it's a combination of trying to get more at bats and frankly in the U.S., this is the place that we haven’t had as many at bats as we'd like to have and we have increased sales coverage there. Secondly, trying to continue to focus on service, so yeah, we feel pretty well-positioned that as long as we can maintain the at-bat level and with the service experience that we are delivering now, that we think we will be in pretty good shape. I think you couple that with the product line-up that we have just announced and Windows 7, we think we've got a pretty compelling offer so yeah, we're optimistic about it.

Now it's possible that this Windows 7 upgrade cycle will be big enough to lift all PC players, but ultimately it's death match with Dell and HP---especially in the enterprise. The rub: Dell's financial performance is spotty and that reflects what could be a vicious crunch. HP squeezes Dell from above and Acer hurts the PC maker from below.

Chris Whitmore, an analyst at Deutsche Bank, said that HP gained share at the expense of profit margins. Whitmore wrote:

Although HP's PC units grew 8% year over year, we estimate HP's operating profit per unit dropped 30% year over year as ASPs were down about 20% year over year and commodities tightened.

That fact could mean some bad news for Dell. HP is diversified enough to squeeze Dell with minimal impact on its overall profitability. Meanwhile, HP's scale means it can weather component pricing fluctuations better.

No matter how you slice it HP has Dell outgunned with a larger services unit (acquiring EDS was the best move HP ever made), more foot soldiers and more momentum. Simply put, HP has the arsenal to squeeze Dell in the critical PC business. Dell may be optimistic about the PC buying cycle, but that doesn't necessarily mean it will harvest all the rewards.

Topics: Software, Dell, Hardware, Hewlett-Packard, Microsoft, Operating Systems, Windows

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.

Talkback

143 comments
Log in or register to join the discussion
  • Well, the great thing is all the competition. I like to see Acer squeezing

    them both from below, and of course competing with
    each other. Of course also great to see all the
    pressure on MS to innovate and lower prices.
    DonnieBoy
    • The problem is...

      ...that Acer and HP are the two worst in reliability. Meanwhile, Asus has quietly taken the top spot in that category, and is now negotiating to buy Toshiba's PC division. Acer is also being squeezed from below. Ain't competition great?
      itpro_z
    • Acer?

      Really? The Wal-Mart brand of computers?
      The one and only, Cylon Centurion
      • That are...

        That are, surprisingly enough, pretty good mass produced systems. We've got a few of them around here, and have fewer problems with them than the Dell's and the HP's.
        Dr. John
      • brainless put-down

        Have you used an Acer?
        The plastic looks cheap, but they do what a computer needs to do. If you want elite status, buy an iApple something.
        yonian
        • My Acer laptop's fine

          Got a terrific price (for the time) over 2
          years ago, the only internal upgrade being more
          memory, and been running Win7 for a while. Not
          a peep of trouble that I could pin on the
          hardware, so what's not to like?

          Oh well yeah, I had to replace the power
          adapter plug, and the size is hard to find but
          got something close enough. Perhaps the strain
          relief could be better, I added some shrink-
          wrap tubing to protect it and try to be gentle.
          ProfQuill
          • Gentle is the key, with all laptops

            We want them to be inexpensive and light, but we expect quality/durability. I am not saying there are no quality issues, but few owners take proper care of their notebooks IMHO.

            And don't forget cleaning, especially dust in the cooling air passages.
            Economister
      • Acer??

        Have you ever examined the insides of an Acer.
        If you do, you'll see why they are low in reliability. Cheap, Cheap. Not just inexpensive, cheap.
        randmart
        • As a matter of fact, MANY times,

          and they are not any different than any other mass produced Dell or HP I have been inside of.

          As a matter of fact, I disassembled an Acer Aspire One recently to upgrade it to 1.5 gig RAM. I was surprised at the number of screws I had to remove to get to the memory module. Very solidly built machine.

          babyboomer57
      • Acer makes systems at all levels ...

        of the PC industry just as HP does. You calling HP a Wally World brand as well? Wal-Mart sells them.

        Also, acer now owns E-Machines and Gateway, among others.

        High failure rates, support issues? The more you sell, the more there will be.

        By the way, the Acer Aspire One is the leading Netbook seller in the entire world.

        Get over yourself, please.
        babyboomer57
    • The problem with squeezing ...

      ... top-tier vendors is that eventually the profit margins are so low that even the top-tier vendors cannot afford to innovate. Once the innovation is gone, quality slips.
      M Wagner
      • Like GM, I suppose

        At least, we hope, that the government won't bail out any IT industry...
        Mahegan
    • But there volume does not affect Microsoft

      If 100,000 people purchase computers 60/40 in favor of HP, then the next time around 70/30 in favor of HP, it affects them both, but Microsoft no so much
      GuidingLight
      • Not so.

        It is a delicate balance. MS is being squeezed by the OEMs to reduce their cost of the OS. Starter aside ($20 squeeze right there), the OS represents 30% of the cost of a $399 machine. You can be sure that MS is on the defensive with all OEMs to preserve their price points.

        TripleII
        TripleII-21189418044173169409978279405827
        • Well with the OEMs squeezing them in from the bottom...

          ...and the Justice Department squeezing (M$) from the top, we're in for some 'happy' monopoly times.

          :)
          Wintel BSOD
          • Google, IBM, Apple and AT&T maybe, but MS....not really...

            http://www.physorg.com/news174282532.html

            Ms. Varney has publically announced that Google is on the top of her list for AT concerns, and you can see there is plenty of AT action to go around at IBM, Apple and AT&T.

            But Ms. Varney has said that MS is no longer relevant and not a concern. Interesting, eh?

            Google's webOS will be watched like a hawk and any sign of a tie-in to their advertising business and I believe that OS will be history.
            I wonder if Google is planning for the requirement to allow the user to select their "Browser of choice" ? LOL!!!

            Now is the time MS can actually get busy and make up for 10 years of lost ground (figuratively speaking, they've obviously lost very little considering 10 years of strict oversight. The door was wide open and there was still barely a change.)

            And with the Windows 7 netbook breaking onto the scene, there goes the remaining 10% not in MS control back to the mothership.
            Ain't life wtih Windows grand! LOL
            xuniL_z
          • It's only the first year of the Obama Administration

            Give it time. lol... :D

            Whatsa matter, shill? Afraid they won't have handcuffs big enough for ya?

            more lol... :D
            Wintel BSOD
          • Your point?

            It's the first year and the head of the AT Dept has said MS is not a concern to her. She called MS irrelevant and Google is on her radar in a big way. Apparently she keeps up with technology and thinks owning the internet is more dangerous to competition than a commodity market item like desktop OS. There are many other machines of varying shapes and sizes not running Windows. The days of crafting a monopoly where there was no true monopoly, behind closed DoJ doors, from one architecture, thus removing Apple and Sun and everyone else that had total freedom to compete, from the argument are long dead my boy.
            By the time they mop up IBM and Apple and then figure out what is the best course to take against Google, their 4 years will be up.

            Your worst nightmare is occuring...MS has slipped to the bottom of the AT list, while retaining their market mostly intact, with free reign to actually start competing again w/o the DoJ breathing down their neck.

            It's a great time to be Microsoft. LOL <br>
            ]:)
            xuniL_z
          • My point also being...

            It's also interesting that your article says the following:

            "John Briggs, co-chairman of the antitrust group with Axinn, Veltrop & Harkrider LLP, said he would not be surprised to see the Justice Department [b]also turn its sights back to Microsoft Corp."[/b]

            Hmmm....

            Maybe Bernie Madoff, pt. II clone....?

            lol... :D
            Wintel BSOD
          • He wouldn't be surprised, but he's speculating about the future. We know..

            the here and now is a major focus on Google, action against IBM and forthcoming investigations into Apple, possibly on multiple fronts.

            I guess it's going to take reality to sink in a bit before you ABM diehards realize you are the only ones singing your tune. LOL.
            <br>
            ]:)
            <br> Long live Microsoft. Windows 7 Rocks. Have you tried it out yet lad?
            ]:)
            xuniL_z