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Technology Stocks : Hewlett-Packard (HPQ) -- Ignore unavailable to you. Want to Upgrade?

To: kumar who wrote (1899)	10/14/2002 10:59:35 AM
From: The Duke of URL©	Read Replies (2) \| Respond to of 4345

Dell in the printer business: Carly dismisses Dell as a distributor of printers and as such unable to effect any major changes in the industry. What this comment overlooks is of course, Dell's ability to control the manufacturer-vendor. Sales wise, Dell at 30BB is 8x larger than Lexmark (lxk) at 4BB. Anyway, here is the article from ZDNet (to my novice mind, the article is interesting but missing in some of its analysis): Michael Dell: Challenging the rules By Charles Cooper Special to ZDNet October 14, 2002, 6:13 AM PT COMMENTARY--Watching Dell Computer stray beyond the familiar confines of the PC industry, the tut-tutters are clearing their throats in preparation for a collective "I told you so." Not me. After consistently underestimating Dell's ability to slay giants over the years, yours truly is going to check the wait-and-see box and take it all in from the vantage point of the cheap seats. That's not to say the conventional wisdom is wrong. In challenging Hewlett-Packard in printers (and cartridges) and Cisco Systems in switches, Dell is picking fights with some bad hombres--and on their home turf. "No one doubts the size of Dell's mouth, but the facts show that their throat is quite small," an executive from one Dell rival told me. "There is a point beyond which Dell can't go." The naysayers grudgingly allow that Dell does commodity distribution better than any company in the computer industry. They hasten to add, though, that the old formula can't work in new businesses where intellectual property is the key differentiator between products. In the mid-1980s, I heard similar wishful thinking from senior executives at Compaq Computer. At the time, the thought of selling PCs directly to customers was simply blasphemous. There was just one-way to sell PCs--and that was via computer dealers. "Channel purity" (which meant big markups for manufacturers' middlemen) was considered sacrosanct. The reasoning was that since personal computers were awfully complicated machines--obviously beyond the understanding of mere mortals--customers needed the handholding and support that only a face-to-face representative could offer. In truth, the early crop of x86 computers wasn't all that mysterious, and hundreds of thousands (later millions) of customers were quite willing to buy from mail-order outfits. Their computers were less expensive and functioned just as well as--if not better than--comparable computers made by IBM or Compaq. Michael Dell helped get it all started, selling computers out of his dorm room at the University of Texas. But he wasn't the only one. Sharp-witted entrepreneurs like Art Lazere at Northgate, Greg Herrick at Zeos and Ted Waitt at Gateway (yes, he sported the ponytail even then) arrived on the scene and were soon running circles around the established leaders of the computer industry. Still, for a good part of the next decade, the computing powers-that-were chose to ignore the challenge posed by commodity clone makers. Their resistance eventually gave way because a good number of their customers preferred buying direct to buying from resellers. Even a computer blueblood like IBM dabbled for a time with its own separate PC mail-order business in a failed bid to duke it out with the mail-order crowd. Fast forward to 2002, and arguments with a 1988 vintage are getting recycled to explain why Dell can't successfully market "value-added" products like laser printers and routers. This is a lot different from selling PCs or even servers. Dell is even in danger of becoming the thing it most despises: the middleman And so on and so forth. Maybe the critics are right. Maybe Dell is biting off more than it can chew. Every winning streak comes to an end, and so will this one. Then again, upstarts have a way of changing the rules of the game. • • •