scott -
I am beginning to suspect that CPQ is on a different course than their public positioning suggests, with a much stronger shift to infrastructure and specialty stuff, especially after reading some of the press around telecom from Europe. But even so, CPQ grew PC volume in the US by 55% in Q2, the same as DELL - they are not exactly dying on the vine.
DELL gained more on a percentage basis worldwide - but they are at a lower share position outside of North America. As they grow, their percentage gains in those other markets will stabilize as well.
If both DELL and CPQ continue to grow volume at better than 30% and the industry is growing at 20%, then what I see happening is not DELL stealing share from CPQ - in fact, if CPQ is growing share, which they are in every market, no one is stealing share from them. But both DELL and CPQ are getting that share from someone! The endgame is DELL and CPQ killing everyone else. CPQ has cost control problems but it has not significantly impacted the top line - yet.
There is no question that DELL continues to execute well in the PC space. They are lining up to assault the consumer space. There is a reason why DELL has not gone there previously - the market is not a good match for DELL's current product line or business model. I would expect DELL to make appropriate modifications to both to be successful in that business. But even so, they need to counterbalance that initiative with continued development of their high end business to maintain overall margin and ASP.
That last problem is the one which DELL has been struggling with for more than a year. They are still adjusting their strategy. In mid-98, they were planning to build storage and service capability through a combination of close partnerships and internal infrastructure. Now it is clear that they are moving to a much more leveraged model in both markets. This has the benefit of quicker time to market, but it also indicates that building the internal capability was harder than they thought.
The next 6 months should tell whether the current approach will fly or not. Based on the confidence I see in the management team, I suspect that they think they have it licked. |
