Jim,
I looked for something to confirm Maria's statement (always a good idea) and came across this interesting article about Intel based server sales (it doesn't answer the question):
Compaq Wary Of Dell's Growth In Server Market
By: John Pletz - New York Times Syndicate
6/15/00 10:05:22 AM
Source: CNET Investor
AUSTIN, Texas - Dell Computer Corp.'s (NAS: DELL - Quote, Broker Reports, Messages) steady market-share gains in the server business are causing serious pain for cross-state rival Compaq Computer Corp. (NYSE: CPQ - Quote, Broker Reports, Messages), the leading PC maker and top seller of Intel-based servers.
The bitter rivalry between the world's two biggest PC makers isn't anything new. But in a sign of just how tough it has become, Compaq two months ago launched a program called ``Dell Win-Back'' in hopes of stemming or reversing the losses to Dell and preventing others in the future.
What's at stake is one of the fastest-growing - and most profitable - areas of PC sales. High-powered servers run everything from business networks to e-commerce sites and are a crucial source of profits for PC makers like Dell and Compaq.
To help stop the defections to Dell, Houston-based Compaq is boosting its server sales force and has plans to double it next year. In addition to its 70 server salespeople, the company also will mobilize a 12-member SWAT unit of specialists to work on accounts and, in some cases, send its top executives to woo specific customers. It also is giving regional managers more flexibility to negotiate prices, though it says it won't lose money just to make a sale.
``This is about getting valued customers who have long relationships with Compaq,'' said company spokesman Arch Currid. ``It's about putting additional focus on whatever issue made them turn to Dell.''
It's an awkward situation for Compaq.
``We must be doing something right that they're getting that focused against us,'' said Dell spokesman Jerele Neeld. ``Any time somebody puts that focused an effort on you and talks about it publicly, you have to assume they're feeling the pain.''
Dell's pricing and service have helped the Round Rock-based manufacturer increase its market share in the server business by 10 percentage points last year. Dell continued its assault during the first quarter this year, gaining 3 percentage points of market share worldwide and accounting for 40 percent of the industry's server growth, according to the company.
Compaq still leads the Intel server market with about 40 percent share, based on total units shipped, compared to Dell's 25 percent, according to industry estimates. When non-Intel servers are included, Dell slips to No. 4, behind Compaq, IBM Corp. and Hewlett-Packard Co.
But the real story is growth: While Compaq's server business increased 31 percent last year based on revenue, Dell grew 57 percent, figures from researcher International Data Corp. show. Based on units shipped, Compaq grew 38 percent, compared to Dell's 82 percent increase.
Among the high-profile accounts Dell says it has won from Compaq in the last year is that of Irving-based Exxon Mobil Corp. Compaq declined to name accounts that it has lost or that may be at risk.
``These are accounts one reason or another who were predominantly buying from Compaq, but for one reason or another are leaning toward Dell,'' Currid said, declining to name names.
But Compaq faces an uphill battle against Dell, some analysts say. ``Those who had a bad experience and went to Dell are not all that likely to go back now,'' said Rob Enderle, an analyst with Giga Information Group. ``It takes a minimum five years to win back a customer that has left.'' Some analysts remain unconvinced that Compaq can overcome the challenge of competing with Dell's price and efficiency advantages of direct sales over Compaq's third-party distribution system.
``Dell is doing a great job of coming in at the lowest price points and better delivery,'' said David Bailey, analyst with Gerard Klauer Mattison & Co., said of Compaq. ``Compaq has a pretty good set of offerings from technical point of view, but they're being hamstrung by the indirect model.''
The key problem for Compaq is the reliance on resellers, Enderle said.
``Compaq turns the relationship over to the reseller,'' he said. ``And the performance of the resellers not been consistent. Many of them are struggling with profitability, and they've had a problem retaining people.''
Compaq said it will deal direct.
``If a customer says it wants to work directly with us and not the reseller, we'll work directly with that customer,'' Currid said. ``That will no longer be a deal breaker.''
But old habits die hard.
``Our (profit-and-loss) is built on ... selling servers through'' distributors, Tom LaRocca, Compaq's marketing chief for Windows/Intel servers acknowledged at a reseller conference June 5, according to trade journal VARBusiness. ``It's not built on direct sales.''
New York Times Syndicate
John Pletz |
