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Michael Dell, CEO and founder of Dell, insists
there is plenty of growth ahead for his company
and his industry. Dell cites Europe and South
America as two areas where it can expand. The
real problem, he says, is the impossibly high
expectations of sales growth that analysts have
set for his company. "They keep raising them
and raising them. And you play that out logically,
and at some point they put their guesses so high
that they are not really achievable." Dell's
first-quarter revenue is growing 38%, a
spectacular number for most companies. But
Wall Street had been expecting better, and Dell's
stock tumbled.
Dell, as well as Compaq and IBM, is still a
powerful brand in an indispensable industry, but
then again, Sony is a leading brand in an
industry in which pricing and growth rates were
once comparable to the PC business: television
sets. Today Dell trades at a price/earnings ratio
of 75; Sony trades at a P/E of 23.
Even more ominous for the industry is the
generation of information appliances touted as
the next wave of microprocessor-loaded
consumer goodies. What happens when you've
got a Windows CE device running at 200 MHz in
the palm of your hand and a cell phone with
Internet access in your pocket? Not to mention
Packard Bell NEC's planned microwave oven with
a video-display terminal on the door so you can
surf the Web while waiting for your burrito to
thaw. E-mail? Web access? Game playing? Will
anyone need a PC to perform what today seem
like PC functions? Well, there will always be
geeks who have to have too much computing
power. But the rest of us may be satisfied gazing
into our microwaves.
--WITH REPORTING BY GREG AUNAPU/MIAMI, S.G.
GWYNNE/AUSTIN AND DAVID NORDAN/ATLANTA
The Big Computer Makers Are Hurting...
Price cuts are nothing new in the computer
world, but after years of steady growth, big PC
makers such as Dell, Compaq and IBM are
finding the market saturated with low-cost
computers, driving down profit margins and share
prices. Those three firms are trying to
compensate by focusing on business customers.
...while sub-$600 computers are booming
Upstarts eMachines and Microworkz, as well as
lower-cost models from Packard Bell NEC, are
the fastest-growing segment of the retail market,
with a 20% share. eMachines' entry-level model
is so hot that one retailer calls it "the Furby of
PCs, impossible to keep in stock." CEO Steven
Dukker vows to sell 2 million of the ultracheap
machines by year's end, promising higher-quality
bargain PCs.
1998: Just 2% of computers sold cost less than
$600
1999: 20% of computers sold cost less than
$600 |
