I've been gone on business for a few days. Saw this in IBD. DOn't know if it's been posted, but just wanted to make sure it got into the thread. Trying to help Mohan as a supplier of thread news?
Fez
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CAN DELL COMPUTER SATISFY THE NEEDS OF SMALL BUSINESS?
Dell Computer Corp. is moving to strengthen its position in the huge but treacherous small-business market.
The personal-computer maker plans to unveil new products and services Monday that it says make it cheaper and easier for small businesses to buy from Dell.
A server called the PowerEdge 1300 is designed to give small businesses more power -the machine can run two processors at once -for under $2,000. And, with help from Wang Global, Dell will offer network installation to small businesses.
The idea is to provide more hand-holding to customers that don't have in-house computer experts. Some analysts say the effort could conflict with Dell's direct-selling roots.
Small businesses require frequent help. That's the hallmark of local sellers of low-cost, no-name ''white boxes.'' But it could be costly for Dell.
''It's really a tough situation,'' said Amir Ahari, an analyst at International Data Corp. in Framingham, Mass.
''If I'm selling a server for less than $2,000, the margin is not going to be big,'' he said. ''If the customer makes two calls to the help desk, I've just broken even. If there's a third call, I've taken a loss.''
It's a risk Dell appears ready to take. There are too many potential customers to overlook, company officials say.
''We'll attract new customers who may not have looked at Dell in the past,'' said Frank Muehleman, general manager of Dell's small- business unit.
Small businesses now can buy their PCs, network gear and servers - the souped-up computers that lie at the heart of networks -from one direct source, he says.
The small- and midsize-business market has heated up over the past year. Dell, Compaq and others have started programs aimed at wooing smaller customers.
U.S. shipments of small-business PCs are expected to rise 14.8% to 10.1 million this year from 8.8 million in '98, says IDC. That would outpace the predicted overall U.S. PC growth rate of 13.9%.
Dell already has the largest share of the U.S. small-business market, says IDC.
But the real competition isn't fellow name-brand PC sellers - it's the makers of so-called ''white boxes.'' They cheaply assemble no-name computers and sell them to local resellers or local businesses. Collectively, they have the most small- business customers.
Dell may have a tough time against the white-box gang. White-box sellers know the customers in their neighborhoods and provide local support. Their low overhead lets them make good profit margins on low prices.
Analysts say the PowerEdge 1300 is competitively priced. But Dell may not be able to earn the same margins as white-box makers. Ahari figures Dell only makes a gross profit margin of 10% to 20% on a product such as the PowerEdge 1300. White-box margins are more like 30%, he says.
And analysts say the more than 7 million small businesses in the U.S. can be hard to reach.
So far, most of Round Rock, Texas-based Dell's small-business customers have been technically savvy.
But as it broadens its customer base, Dell will deal increasingly with buyers that cost more to find, sell to and support.
Dell says its technology gives it an advantage. The PowerEdge 1300 is more expandable than white-box servers, company officials say.
It's the cheapest server you can buy that runs two processors, says Subo Guha, senior manager of Dell's server marketing.
''This will displace the white box,'' he said.
Some small businesses have found that a name brand like Dell can compete with the low-cost no-names.
Dion Casto, vice president of a nine-person, computer-design firm in Dallas, says he used to buy computers from a company down the road. Now, he's strictly a Dell customer.
''Anyone local is going to be small,'' he said. ''If they're eating dinner or they have a vacation planned, you're not going to get the same service.''
Dell's not the only one gunning for the white-box makers. In November, Compaq also unveiled PCs aimed at small businesses.
Compaq's selling the line of computers, called Prosignia, directly to businesses, but also through resellers. Many analysts regard the move as an attempt by Compaq to mimic Dell's direct-selling style.
So it's ironic that Dell appears to be becoming less direct, analysts say. Under its new program, customers' networks will be installed by its partner Wang Global.
Muehleman insists Dell isn't backing away from its direct-sales philosophy, which propelled it to No. 1 in the U.S. Wang helps install some gear, but customers always deal directly with Dell.
''We've structured this to be very true to our model,'' he said. ''We don't want someone to come between us and the customer.'' |
