This from the Dallas Morning News on the NY meeting
4/10/98 - Dell promote its brand image as more upscale and raising some prices
NEW YORK _ Dell Computer Corp. is developing a strategy to promote its brand image as more upscale while effectively raising some prices at a time when most in the personal computer business are focused on selling cheaper machines.
The marketing plans were unveiled Thursday at a meeting of financial analysts in New York, where Dell's forecast was far rosier than Wall Street has been hearing from others in the PC industry.
Michael Dell, chairman and chief executive, said he expects annual unit shipments to increase more than 15 percent through 2000. Dell's sales growth, which soared 59 percent in its last fiscal year to $12.3 billion, will continue to outpace the industry, he said.
So optimistic is Dell that it will soon begin a major advertising campaign to counter a misperception that the company sells bargain PCs to consumers. Dell derives most of its revenue from high-end machines it sells to large corporations.
''Dell has suffered a brand disconnect,'' Del said. ''Compaq can't claim their product is worth more than ours. They can't tell their customers there's a premium for their product. That game is over.''
Round Rock, Texas-based Dell has steadily been reducing the discounts it offers during the past decade, gaining business along the way. ''We are a counter-intuitive company,'' explained Thomas J. Meredith, senior vice president and chief financial officer.
In 1988, Dell PCs were about 40 percent less expensive than competitors' machines, and the company's market share was less than 2 percent. Today, the discount is less than 10 percent, and Dell's market share is more than 6 percent, the company said in its presentation.
''We see a massive opportunity around our brand to create more value for our shareholders,'' Meredith said.
When large corporations place big orders for PCs, analysts said, price is only a small part of the equation, and service and support have become increasingly important.
Dell said several factors should drive PC sales this year, including the introduction of Microsoft Corp.'s Windows 98 operating system, faster models of Intel Corp.'s Pentium II chips and more robust electronic mail systems being favored by large corporations.
Many industry observers, however, have questioned whether companies will upgrade their PCs this year if older machines can still handle basic office software programs. In addition, PCs priced under $1,000 were a retail phenomenon for consumers in the United States last year, and the trend is expanding this year to the business market.
The trend, coupled with slowing demand in Asia, has put considerable strain on leading technology companies, including Intel and Houston-based Compaq Computer Corp.
Dell has remained steadfastly opposed to selling sub-$1,000 PCs, arguing that the company is only interested in products with higher profit margins, such as notebook computers, servers and workstations
Although demand is slowing in parts of Asia, it remains strong in China and other countries where Dell is an increasingly significant player, the company said.
Dell executives dismissed concerns that the PC industry as a whole is slowing down, contending that people turn pessimistic every year at this time because of seasonal sluggishness.
Company officials also suggested that problems at Intel and Compaq, the world's largest PC maker, were tied to Compaq's reducing inventory in the first quarter of the year.
Instead of considering Dell the aberration, they said, perhaps the company is a better bellwether than the others because it sells PCs directly to customers, bypassing retailers, distributors and other middlemen.
(c) 1998, The Dallas Morning News.
Visit The Dallas Morning News on the World Wide Web at dallasnews.com
Distributed by Knight Ridder/Tribune Information Services.
AP-NY-04-09-98 2204EDT< -0- By Alan Goldstein The Dallas Morning News |
