Dell is king of the castle - Analysis

An excellent quarter for Dell highlights the ongoing PC power struggle across Europe.
Written by Jane Wakefield, Contributor

As battles go, the one for domination of the UK PC market may not have the historical interest of Hastings but it is every bit as ferocious. According to analyst firm IDC, a new king is installed this month as Dell steals Compaq's coveted crown for the first time.

Surprised? Probably not. Compaq has been in decline for some time but there is no one reason for Compaq's malaise. Experts agree the PC giant is facing tough competition not only in the UK and not only from Dell. IBM and Hewlett-Packard are both tough competitors and pushing Compaq hard in terms of products and pricing.

In the EMEA (Europe, Middle East and Africa) market as a whole, IBM enjoyed a healthy -- somewhat unexpected -- 48 percent growth with HP not far behind at 40 percent. If reports are anything to go by, expect that to grow under Carleton (Carly) S. Fiorina's leadership. Dell came in third with 39 percent. In the UK IDC gives Dell 18.7 percent market share compared to Compaq's 15.5 percent. Compaq's growth is a negligible 0.6 percent, no doubt embarrassed by Dell's striding 43.3 percent.

You can be sure Dell's quarterly results, due Wednesday, will be accompanied by a fanfare of self-congratulation for its new-found position as number one. The question of course is, can it stay on top?

Compaq has not had a good year by any stretch of the imagination. CEO Eckhard Pfeiffer was sackedand 8000 employees were laid off against a backdrop of quarterly losses that earned the Texan giant the prefix "beleaguered". A promise to sort out internal problems and the installation of a new CEOdid nothing to halt confusion over its distribution strategy. Some product lines will be sold direct, others will not, seems as much sense as most can make of it. Fierce competition in pricing and troubles with its notebook ranges added to the problems. While it holds its lead in Europe and EMEA by a thread, Dell is snapping at its heels and experts agree a rethink of distribution and communications policy is needed.

IDC analyst Karine Paoli believes Dell's decision to build and configure PCs to order combined with good price/technology ratios lie behind its success in the UK market. The direct sales model has allowed the company to be flexible and quick to market and won it praise as a lean, aggressive firm capable of harnessing the Net's opportunities.

Dell marketing manager Martyn Lambert thinks the direct model is behind Dell's rise. Thirty percent of Dell's business is via the Web and with 2000 customer contacts a day, he argues no other PC maker knows more about new trends and customer preferences.

Even as Dell congratulates itself on a fine UK performance experts agree it has its work cut out to stay ahead of Compaq in the corporate market, where it leads with around 42 percent market share to Dell's 21 percent. It's a figure Paoli thinks will spur Dell on. It needs to take on the challenge in the corporate arena and win those vital few points, or lose the crown to the once mighty, now beleagured, Compaq.

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