February 25, 2003 4:43 PM PST

Dell continues its march

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Dell Computer is looking to grow its profits by elbowing its way further into the PC market and cutting costs, company executives said Tuesday.

Dell Computer CEO Michael Dell said he believes his company can capture 30 percent to 40 percent of the worldwide PC market over time by lowering prices on PC hardware to win new customers.

The CEO, speaking at a Goldman Sachs technology conference in La Quinta, Calif., said his company's main focus is on servers, storage and services. Meanwhile, the company is preparing to launch a new line of Dell-branded printers.

"We will be announcing the printers next month, and you'll see essentially two waves of products coming out...that will give us coverage from the network printer all the way to the home office," Dell said. "I wouldn't expect a dramatic change in the competitive landscape of printing...but over time, we see a very nice opportunity for Dell."

While the PC market has stumbled in the past two years, Dell has shown the ability to grow, picking up several points of market share. The company went from having just over 13 percent of the worldwide PC market to owning nearly 16 percent of it between the fourth quarter of 2001 and the fourth quarter of 2002, according to reports from research firms Gartner and IDC.

Still, Dell would have to double its current market share to reach its new goals. And in its attempts to increase its market share, the PC maker has found itself head-to-head in a battle against Hewlett-Packard. HP executives have said they don't plan to give any ground to Dell; the Palo Alto, Calif.-based company is expected to challenge Dell for the top market share spot in coming quarters. Dell came out on top during the third quarter of 2002, but HP won that spot back by about 120,000 units in the fourth quarter of 2002. HP had 16.1 percent of the market to Dell's 15.7 percent during the fourth quarter, according to reports by IDC and Gartner.

Dell expects to win market share in part by lowering its costs, executives said. The company reduced its costs by about $1.2 billion in its fiscal year 2003. It expects to more than double those costs savings in its fiscal 2004, which runs nearly concurrent with calendar 2003.

"We expect to realize a little over $3 billion in savings" during the fiscal year, Dell's CEO said. "Some of our savings will be used to increase margins, but most will be invested in the business to grow market share."

Dell typically passes about 75 percent of its cost savings on to customers in the form of lower prices, he added.

Dell will use those lower prices resulting from the cost-savings as a weapon to gain market share against competitors, though Dell said he hasn't taken aim at a particular company. "We don't necessarily target a particular competitor; what we target is delivering more value to the customer, so (market share) will come wherever it comes from," Dell said.

Instead, the company is focused on expanding its presence outside the United States, where it garnered nearly 30 percent of the PC market in the fourth quarter of 2002. The company's revenue from Europe totaled $2 billion during the fourth quarter, the first time the figure has reached that mark. But the company also faces competition in Europe from HP and in China from local companies like Legend Group.

 

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