Dell computer best buy

A mid last week's market gloom, a couple of small bright spots managed to shine through: Dell Computer said it will meet Wall Street's earnings expectations and electronics retailer Best Buy said it had beat them. Just how they did it serves as a reminder that some companies will not only weather the downturn but emerge stronger from it, thanks to aggressive pricing tactics and improved inventory controls.

Dell's announcement sent its stock soaring 14 percent and helped drive up the Nasdaq nearly 9 percent Thursday. Meeting expectations is no easy feat when the economy is slowing, but what really got investors excited was CEO Michael Dell's pledge to grab an even bigger share of the PC market.

Although demand for personal computers is expected to stay low for a while, Dell's pricing strategy has helped it maintain an even keel while competitors have floundered. To gain market share, the No. 2 PC maker undercuts its competitors' prices, even at the expense of its own short-term profitability. Michael Dell himself indicated he wouldn't rule out acquisitions to boost market share further.

Best Buy managed to one-up Dell's news. Not only did the electronics retailer beat estimates last week, it also suggested analysts raise their forecasts for 2001 and 2002, Shares in Best Buy jumped 9 percent on the Tuesday announcement, despite an otherwise bad day in the market.

But unlike Dell's strategy to undercut rivals, Best Buy did it by investing in market research as well as inventory and supply-chain management. That foresight now helps the company push products most desirable to shoppers, like high-end televisions, and scale back on those that aren't selling, like desktop computers.

Such strategies will determine which companies emerge stronger from the economic downturn. Other electronics retailers may be reeling from slower consumer spending -- RadioShack and Circuit City both announced dismal financial figures last week -- but people are still shopping at Best Buy stores.

Even as the stock market tumbles lower, long-sighted investors are already placing bets on which companies will best manage the hard times: On Monday, Warren Buffett said Berkshire Hathaway had purchased $204 million worth of stock in Gap in recent months. Whatever happens to Gap's stock in the coming weeks, Buffett's track record suggests the company has done something to ensure longer-term prosperity.