From Yahoo new board,
Which one MD is referring to ? I feel chilled in my backbone when
I read this, I hope this is not CPQ ? I hope it is HP -- its PC
business or IBM, no CPQ..
eom
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Friday July 16 5:01 PM ET
Dell Sees Expansion
By Jeff Franks
AUSTIN, Texas (Reuters) - Dell Computer Corp. (Nasdaq:DELL - news) executives Friday predicted their company would be a survivor in a contracting PC industry and vowed they would aggressively enter the market for Internet access.
Speaking at Dell's annual shareholder meeting, Chairman Michael Dell predicted that one of the current top five computer makers would soon be forced out of the business.
He did not name the company he thought most likely to get out, but, as is his custom, took several jabs at troubled Texas rival Compaq Computer Corp (NYSE:CPQ - news) .
''There are not, we believe, dramatic, fundamental changes going on in the industry. Prices have declined at fairly predictable levels similar to trends in other industries, and in this kind of environment the superior business model thrives and those without it flounder,'' said Dell, whose company is the king of direct sales to customers.
Using a chart, Dell showed that Compaq's cost structure was ''about double'' that of Dell's, which is based in Round Rock, Texas near Austin.
''This is a market where the inefficient will not survive. I believe that one of the top five players in the PC market will drop out over the next several years,'' he said. Dell said the company was making a big push into selling Internet access along with its computers, partly in response to competitors who are offering free or low-cost machines to customers who also agree to buy Internet service.
The company had been rumored to be interested in buying an Internet service provider such as MindSpring Enterprises, but vice chairman Kevin Rollins told Reuters it was more likely the company will build up its own Dell.Net service now offered in three European countries and soon to be available in the United States.
''We don't think we need to (buy),'' he said. ''We look at the premiums we would need to pay to make an acquisition and we think we can take that premium and if we gave it to our highly- motivated and talented management team they could probably use that to create something similar,'' Rollins said.
Compaq is the number one PC maker in the world with about 13.4 percent of the market, but has said it will lose money in the second quarter because of pricing pressure on excess inventory -- the same problem that struck the company in 1998.
Houston-based Compaq, which has traditionally sold most of its computers through resellers, fired chief executive Eckhard Pfeiffer in April and is looking for a replacement.
Dell, according to industry figures, is the second leading PC company, with 9.2 percent of the global market, followed in order by IBM Corp., Hewlett-Packard Co. (NYSE:HWP - news), and Gateway Inc. (NYSE:GTW - news) .
Michael Dell said the company he founded out of his University of Texas dormitory room in 1984 is snatching up market share in virtually all categories of the PC industry, including the consumer end. Total company revenues this year are expected to be about $26 billion.
''We see lots of opportunity to grow this business,'' he said. ''Dell is gaining an increasing share of the market each and every year.''
Dell's stock has been stagnant in recent months, partly because of concerns that its sales growth may be flagging. The chairman told shareholders that computer stocks generally had been affected by concerns about interest rates, the Y2K issue, lower sales prices, and ''the implosion of a number of our competitors.''
But he also pointed that, in the last 10 years, while the Standard & Poors 500 index had gone up 325 percent, Dell's stock had appreciated 53,482 percent.
Also Friday, shareholders approved a management proposal to authorize the issuance of up to 7 billion shares, up from the previous authorization of 3 billion.
Dell does not pay cash dividends, but has split its stock three times in the last 1 1/2 years.
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