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Dell Vs. HP

Dell Versus Hewlett Packard
By Richard Stoyeck

There is a war shaping up that involves two giant companies
facing off, and soon there will be three. The war is between
Dell Computer, and Hewlett Packard for supremacy in the personal
computer world. The first battles have been fought, and clearly
Dell has been the winner for years. The next battle seems to be
shaping up as we write this, and Dell seems to be victimizing
itself with recalls, and lackluster customer service at best.

For more than a decade Dell has eaten Hewlett Packard for lunch
in the world of personal computers. Any analyst will tell you
that Hewlett Packard makes a disproportionate share of its
bottom line from selling ink for their printers. They sell the
printer probably at a lost just to get the ink resupply
business. If you buy a HWP machine, they don’t even include a
printer cable in the box. They would like to because it only
cost a dollar or two. What happens instead is that stores like
Best Buy, Circuit City, and others demand that the cable not be
included. These stores sell the cable as a separate item for $20
to $30 depending on length. Not a bad markup, pay a dollar or
two, and sell it for $30. The stores make more money on the
printer cable, than they make on the printer.

Carly Fiorina, the former Chairwoman of Hewlett Packard
developed a corporate strategy that was working. The Board
simply got tired of her. Today the current Board is implementing
her strategy and it’s working.

Dell meanwhile has had a tremendous fall from grace. Dell
really doesn’t manufacture anything. They are an assembler and a
shipper. All manufacturing is done overseas in an attempt to
remain the low cost producer. Through the years, Dell was so
superior at this that some of their financial metrics were
meaningless. As an example, one of the things that analysts like
to know is how long it takes you to pay your bills. Dell turned
the whole concept over on its head.

Let’s look at an example. You order a computer from Dell, and
pay for it immediately by credit card. They have your cash.
Dell’s suppliers ship the components for that machine before
there is any money due them by Dell. This means Dell gets your
cash, and may not have to spend that cash for months. The usable
float amounts to billions of dollars. So why has Dell fallen
from grace. It comes down to this. When you play by the edge of
the table, sometimes you fall off.

Dell’s customer telephone service centers in India are failing
the American consumer miserably. They may speak English, but
they do not understand our culture, and they do not get the job
done, as far as consumer satisfaction is concerned. In the end,
consumer satisfaction is everything. People vote with their feet
and the consumer is voting to buy somebody else’s machines,
namely Hewlett Packard is the main beneficiary.

The consumer is now becoming aware that certain Sony
manufactured notebook batteries sold by Dell from April 2004,
until July 2006 are capable of exploding and causing a fire. A
Dell recall is now in effect involving 4 million PC batteries on
a world-wide basis, of which 2.7 million are in the United

Recently the Wall Street Journal carried an article about a
laptop computer smoking on an airplane while on the runway. The
crew was able to open the door and throw the machine out onto a
conveyer before it erupted into flames. We now have over 4
million machines capable of this on a world-wide basis. Several
weeks ago, a Dell computer was shown to be on fire in a movie
that circulated by the bloggers on the Internet. Dell tried to
downplay the story unsuccessfully. Great management teams
confront their problems and deal with them, that’s not what’s
happening at Dell.

What is happening with Dell is that they at the very least seem
to be losing their edge which they have had since the beginning
of the PC revolution. There comes a time in every company’s
growth cycle when the company gets “Tired” for want of a better
word. PC’s have become as easy to build as toasters. There
really are no brand differences between competing companies,
other than advertising.

What Dell needs to do to get back in the game is re-energize
itself. This is no longer the company that was the subject of
several Harvard Business School case studies. They must get
their suppliers to conform to what use to be very high
standards, and pull their customer service act together.

If former “also ran” Hewlett Packard can pull it off, then so
can Dell. HPQ has successfully merged giant Compaq Computer into
its operations. The post integration savings have been achieved,
and it now appears that the merger was done seamlessly, and
restructuring savings are still being achieved.

What’s coming next will be China’s Lenovo which took possession
of IBM personal computer division and will be making its move
against both Dell, and Hewlett Packard. Both of the American
based companies have heavy manufacturing done in China. Lenovo
will do whatever it has to do in an attempt to garner market
share for its personal computer manufacturing segment. Over the
next two years there will be a 3 way war. The argument will be
since Dell and HPQ are selling China manufactured products
already, why not buy China direct. It will be interesting to see
how the winners sort themselves out, what will be Wal-Mart’s
roll, since 70% of all products sold by the giant chain come
from China. Wal-Mart really is China’s distribution arm.

Goodbye and good luck,
Richard Stoyeck

Specifications on many laptops can be found at here is one example Dell Inspiron 1420 Notebook Specs

About the Author: Richard Stoyeck’s background includes being a
limited partner at Bear Stearns, Senior VP at Lehman Brothers,
Kuhn Loeb, Arthur Andersen, and KPMG. Educated at Pace
University, NYU, and Harvard University, today he runs
Rockefeller Capital Partners and


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