John -
Your thought-provoking posts are always welcome. I wholeheartedly endorse the concept of consolidation of the big 4, but even more important is your comment about sub-markets. The behavior that I see demonstrates to me that Dell is winning in the midrange commercial desktop space bigtime, and the consolidation trend accelerates this dynamic. As you point out, IBM and HP have largely given up serious contention there, and have taken up a 'surf' model - riding the wave of their enterprise and service business to pull desktop sales. This drives them to price those products for profit, since the demand is driven by their other product lines and not an elastic market. dropping price does not increase their sales, it just costs on the bottom line.
CPQ is playing a different game. They are driving below Dell in the consumer space with high-volume products, and in the commercial space with a combination of the HP/IBM surf model, and with some innovative low-price options. But their whole plan in commercial seems to be to create an alternate value proposition to Dells model. This says to me that they are not going to compete head to head against Dell's strong areas but strive to limit the penetration by changing the game. Dell is very agile and while I think CPQ will be successful in defending overall share, it will not be at the expense of Dell. So in this segment it will be Dell and CPQ, and actually there will be sub-segments, one dominated by CPQ and the other by Dell.
As to obsolescence, it has always been part of the picture and it has never been important. Technology cycles will continue to drive replacement at or above historical rates. MSD is right on there.
I see nothing but blue sky for Dell for at least another year, and the only thing that would hurt them even then would be incorrect business positioning (like the straddle I mentioned earlier). There is plenty of room for Dell to maintain 'hypergrowth' for another 3 years at least if they just play their hand. They need to use this time to make a move to the next model. |
