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To: Ahda who wrote (18)	12/4/2002 10:26:31 AM
From: Ahda	Respond to of 594

Technology - Reuters Dell Preaches Caution, Swears Off China Price War Tue Dec 3, 1:17 AM ET Add Technology - Reuters to My Yahoo! By Edwin Chan SHANGHAI (Reuters) - It's not like Dell Computer Corp to preach caution, but that's exactly what the personal computer giant is doing as it muscles into China. Global leader Dell -- which grew by selling directly to customers -- finds itself in the unaccustomed role of a tiny, humble player in a market expected to overtake Japan as the world's second largest PC market next year. Last year, Dell boasted it would drive the cost of a consumer PC in China down to the price of a television, but now the talk is about profits rather than gaining market share. "We can certainly say, forget about profit and shoot all the way up," Foo Piau Phang, Dell's managing director for China and Hong Kong, said in an interview. "In China, you can grow very fast at the expense of profit. And we can do that, but that's a very dangerous path." The company did rack up 37.7 percent growth in PC shipments and 18 percent growth in sales in the first nine months of 2002 over the same period of last year, said the Singapore-born industry veteran. But the estimated 400,000 PCs it sold gave it only an estimated market share of five percent, pale in comparison to homegrown Legend Corp, China's pre-eminent player. Legend, which surfaced in the early 1990s but is already Asia's largest seller, has a dominant 30 percent of the Chinese market and accounts for about 15 percent of all PC shipments in the region. "Look at Legend's growth, it's even more frightening. (We'd be happy) if we grow at a reasonable rate respective to Legend or the market," said Foo, who has worked in the industry for more than a decade. Experts say foreign technology firms in China are often stymied by prices, because foreign products vying with domestic alternatives -- with more comprehensive distribution and support -- have to be priced too low to generate sufficient earnings. (Story continues after advertisement) So Dell is taking it slow and steady, having decided to focus on service and quality and sidestep a price war with domestic players who have staked out the lion's share of a price-conscious market growing at an estimated 15 to 20 percent annually. PRICE WAR BREWS That growth is decelerating after the breakneck pace of the 1990s. Sales in dollar terms remain low, despite the huge shipments, because prices tend to be lower than in other markets. Worse, fears of a price war have resurfaced intermittently since Dell first delved into the mainland in 1998. In October, Legend shaved 14 percent off the price tag of its high-end "Tianlin" PC to 7,999 yuan ($966), sparking speculation it was targeting a new, comparable Dell model costing one yuan less. Dell earlier had launched a low-end model for just 4,798 yuan. The stakes are high. The International Data Corp consultancy estimates more than 11 million PCs will be shipped on the mainland this year. In the third quarter, analyst Kathy Sin said about 3.1 million PCs were sold in China to Japan's 2.7 million. Dell's own sales fell just shy of 400,000 in the first nine months, Sin estimated. Analysts say foreign PC-makers like Dell haven't a prayer of going head-to-head against domestic players like Legend and Shanghai Founder, which enjoy a web of industry relationships and ties with government buyers. The three domestic players -- Legend, Founder and Beijing-based Tsinghua Tongfang -- hold sway over nearly half the market. The three largest foreign vendors, Dell, IBM and Hewlett-Packard, fight for the leftovers. That doesn't bother Foo for now. He said Dell's market share inched up in the third quarter, while IBM and HP's shares dipped. "People always look at Dell and say that this is very aggressive. But we're only the number four player. There are a lot more aggressive people who grow at all costs," Foo said. "Definitely I see us able to maintain at least what we have been doing this year in terms of momentum." "Our model is working fine," he said. ($1=8.277 Yuan)