Jim, all, quote from Dell (and Compaq) about server sales, other info:
The most interesting part, if you like servers. (I like servers.):
Dell is expanding its product line to include more
high-end servers, aiming squarely at Compaq's key
market. Dell's server sales to large business
customers have gone up 140% in the past year,
while Compaq's have risen only about 45%, says
Kumar. And Dell was the first major manufacturer
to introduce a server using Intel's fast Xeon
processors, which customers are demanding.
The rest:
usatoday.com
10/19/98- Updated 09:27 AM ET
The Nation's Homepage
Compaq, Dell a Texas twosome
Lone Star State computer rivals duke it out
HOUSTON -- On the floor of Compaq Computer's
aging plant here, dozens of technicians assemble
the latest Presarios for shipping to stores and,
hopefully, buyers unknown. In a retooled factory
next door, a much smaller crew builds
custom-ordered personal computers.
In Austin, 160 miles away, Dell
Computer's year-old assembly
lines are humming. Trucks from
suppliers marshal the front of
each line, while others packed
with computers ready to ship
buttress the end. Every line is
moving, and every computer part
has a customer's name attached
from the first step.
Today, Compaq is building only
about 10% of its computers to
custom orders. The goal was
50% by now.
The differences in the two factories illustrate how
the world's No. 1 personal computer maker,
Compaq, is struggling to stay out in front of
up-and-coming Dell in a period of record growth
and massive change.
"I just finished my 60th quarter, and this might
rank up there with the most difficult quarter I've
ever had," says Greg Petsch, Compaq's senior
vice president of manufacturing and quality.
Compaq, which operates in 100 countries and
employs more than twice the number of workers
as Dell, must keep pace with changing markets as
it grows into a company that sells everything from
desktop and laptop PCs to mainframe computers
and consulting services. Its acquisitions of Digital
Equipment this year and Tandem last year give it a
product range matched only by Hewlett-Packard
and IBM.
Analysts and others say Compaq has little margin
for error at a time when the market for computers
is changing as quickly as computer technology.
The Asian economic crisis has hurt sales, and
falling prices for PCs and computer chips are
squeezing profits. Technology research firm
Dataquest says revenue from the computer server
business has fallen 11% since last year.
"We've known since January that once we closed
(the Digital deal) we had to be ready to roll," says
Compaq CEO Eckhard Pfeiffer, 57.
To keep Digital's customers from defecting,
Pfeiffer retained many top Digital executives, such
as John Rando, who headed Digital's widely
respected services organization. Under Compaq,
Rando has been able to keep revenue for that
division growing.
Adapting slowly
But Compaq has been hurt in other areas,
especially by its slowness to adapt to the
build-to-order model of PC sales. Companies such
as Dell and Gateway, which builds computers
only after customers order them, have a
bottom-line advantage because they never have
much inventory to become obsolete and lose
value.
Compaq learned the hard way that, with factories
on three continents and thousands of employees,
such a massive change takes time. The company
already had been retooling its factories with
software designed for traditional manufacturing
when the decision to shift to custom-built PCs was
made. That new software needed to be redesigned
again, along with the assembly lines.
"We've lost sales" because Compaq has taken too
long to deliver custom computers, says Ed
Anderson, president of CompuCom, one of
Compaq's largest distributors. But he says
Compaq is moving quickly to correct problems
and is almost able to turn orders around in two
weeks. "We're almost home. If we can keep the
unsold inventory of computers at two weeks or
less, the cost advantage that Dell has is gone,"
says Anderson. Dell, the industry leader in
inventory management, recently reported an
eight-day supply of PCs.
Despite the inevitable comparisons between the
two computer makers and allusions to a Texas
rivalry, the companies don't see themselves as
head-to-head competitors. Dell's strength is its
ability to sell large numbers of custom-configured
desktops to business customers. Its consumer
business aims more at the PC-savvy who don't
need a lot of labor-intensive hand-holding.
Compaq's focus is in the large computer and
workstation area, where profits traditionally have
been high. Its consumer business aims at the low
end, with the idea that a customer who chooses a
$799 Compaq PC will remain a Compaq customer
for more expensive purchases. Compaq also sees
a revenue stream coming from Internet services
sold along with its PCs, noting that the average
Compaq consumer buyer visits Compaq's Alta
Vista search site on the Internet at least once a
day.
Although Compaq's worldwide PC sales dwarf
Dell's, Dell's sales figures are impressive. In the
quarter ending Aug. 2, Dell's revenue was $4.3
billion, up 53% from $2.8 billion a year earlier.
Compaq's comparable quarter showed revenue of
$5.8 billion, up 5% from a year earlier.
"There's enough market that each company could
double or triple without taking market share from
the other, but the Texas rivalry is there," says Jim
Schraith, former vice president and general
manager of Compaq's North American operations
and president and CEO of ShareWave, which
makes home networking equipment.
But analyst Ashok Kumar of Piper Jaffray is not so
sure that both companies can co-exist.
Dell is expanding its product line to include more
high-end servers, aiming squarely at Compaq's key
market. Dell's server sales to large business
customers have gone up 140% in the past year,
while Compaq's have risen only about 45%, says
Kumar. And Dell was the first major manufacturer
to introduce a server using Intel's fast Xeon
processors, which customers are demanding.
"With the market slowing down, you probably
have a situation where Compaq and Dell are
bidding against each other," but Dell can win
because of its low-cost structure, says Kumar.
Acting like a startup
Dell founder and CEO Michael Dell, 33, prides
himself on his ability to keep his 14-year-old
company moving quickly and acting like a startup.
That means breaking off divisions into pieces as
business grows, keeping the line between the
lowest-ranking employees and the top managers as
short as possible.
Compaq's top managers, by contrast, have seen
their responsibilities more than double since it
acquired Digital. The company has grown from
about 30,500 to 84,000 employees, and its size
makes it tough to change anything fast. Even though
that's what CEO Pfeiffer wants to do. "Rather than
letting other competitors climb up behind us and
narrow the gap, we made the move quickly" into
high-end enterprise computing by acquiring
Tandem and Digital, says Pfeiffer. Integrating the
companies "will establish our leadership."
Meanwhile in Austin, Dell's top managers aim to
keep their growing company feeling small. The
Dell sales division that once hawked computers to
all schools, from primary to university level, now
is split into three smaller divisions, each targeting
a smaller slice of the educational market.
"It replicates the growth and development of the
company inside with lots of 'little Dells,' " says
Michael Dell. Also key, says Vice Chairman
Kevin Rollins: "If you are operating a tad
under-resourced, you prioritize."
So far, that strategy has worked. Over the past
year, Dell was the fastest-growing stock on the
S&P 500, up 129%. Shares of Dell that sold for
$8.50 on June 22, 1988, when the company went
public, are worth about $2,600 now, counting
splits. Profits keep climbing, too. For the quarter
ending Aug. 2, Dell's net income was $346
million, up from $214 million a year earlier.
The success is "a freak of business nature," admits
Rollins, but he credits Dell's business model and
its ability to move swiftly as market conditions
shift. Compaq and other companies rely on sales
forecasts to determine how many computers to
build, says Rollins, and the forecasts aren't always
accurate.
How long will the good times last? A Michael
Dell responds: "I haven't found where it will run
out of gas. We're getting to the fun part here."
By Doug Levy, USA TODAY |
