Computer component and dell

It's a simple business plan that has made Dell Computer Corp. a force to be reckoned with in the enterprise PC market -- enter a large and profitable market that has a clear set of standards and beat the competition with rock bottom prices.

However, those market conditions have yet to be met in the PDA space, which is why Dell is steering clear.

"If it happens in six months, we'll be in the market in six months. But if it's six years, we'll be in the market in six years," said Michael Dell during an interview with Computing Canada. "The product development is not the hard part here. The hard part is getting a large market that is profitable (and) that has clear standards.

"If you look at the size of the (PDA) market for example, there are about two million Pocket PCs sold per year, versus about 130 million PCs. It's not a very large market. Third, industry standards. . ..You've got . . lots of different characters out there, so there's no clear standard yet."

However, Albert Daoust, director of special projects for Toronto-based Evans Research Corp., questioned what the absence of Dell and IBM in the Pocket PC market means for its credibility and longevity.

"There's another reason why -- for the overall health of the market I would like IBM to be in this, I would like Michael Dell to be in it -- it would be good for consumer choice," he said.

According to Daoust, the Pocket PC failed, when upon its initial release, it was believed to be a purely enterprise-oriented product. But it gained a whole new group of users when, 18 months ago, Hewlett-Packard decided to target the unit to the consumer market.

"So now that raises the question -- is the handheld computer a commercialized part of your IT infrastructure product . . . or is it a consumer product?" said Daoust. "If this pans out to be a consumer product, there may never be a particularly wonderful opportunity for Dell (to enter the market), who is first and foremost a supplier to the corporate market."

While the PC has been Dell's bread and butter, notebook sales within the enterprise are not exactly the equivalent of low-fat margarine. According to Dell, notebooks make up 25 per cent of the company's share of corporate business, with plans for it to increase.

"What's been happening is more people have been buying mobile computers, as opposed to desktop computers, and certainly as the price comes down you'd rather have a mobile than a fixed computer," said Dell. "There are some problems with that in the sense that whenever you have a new processor, or as with the Pentium 4, of course it comes out on the desktop (first). So you have kind of a reversion back to the desktop for a while.

"The long-term trend is clear -- people want to take their data with them. They want mobile computers (and) as we're able to make them more affordable, obviously (it will) increase the market."

According to Evans Research, in 2001 Dell finished in second place with a 17 per cent share of the enterprise notebook market. IBM ranked No. 1 with 31 per cent market share.

But just how feasible is it for Dell to sustain and gain market share based purely on price?

"It appears as though the price war is slowing down. The past six months, in Canada anyway, looks that way. It's very expensive for vendors to compete solely on price. It's a very expensive proposition and it's not one that can sustain an organization," said Michelle Warren, PC industry analyst for Evans Research. "Dell has certainly helped the Canadian economy become a little bit more competitive than it was. But it's not strictly a price war up here. Looking at corporate users, they're buying a PC based on service agreements or based upon customer service, availability and component selection."

"I endorse Mr. Dell's business strategy (although) it hurts me to say this," said Daoust, "because he is right, given his basic mission is to be a low cost producer, rather than an innovator. It makes sense for him to wait until the market develops a critical mass that is consistent with his path of not evangelizing or promoting a new technology product category. He follows after other pioneers have gone bankrupt trying to create the interest."