Dell remains the powerhouse of the PC market. According to Gartner, the supplier shipped 9.4 million PCs in the first quarter of this year. But the analyst says HP has been closing the gap, gaining market share from Dell.
The vendor is increasingly diversifying its business, and achieving success in servers, storage and services. But it relies on PCs for about 40 per cent of its revenue.
Last month, Dell shares fell after a profit warning caused by growing competition and price cutting in the PC market. The stock price has fallen from $32 (£17) in February to less than $24 (£13) last week.
Computing talked exclusively to Josh Claman, vice president and general manager for Dell UK, about the challenges the company faces.
What is happening in the PC market?
You have to divide the PC market into categories because each is doing fundamentally different things. The desktop market is slow. In some countries there is a little growth, in others a little fall. It is pretty sluggish. Part of that is driven by less buying, part of it by a changing mixture of desktop and notebook purchases.
According to IDC, in the UK we have flat growth on PCs, but we gain some share on notebooks, quite a bit of share on servers, and more share on storage. That is pretty much the story around the world. We have been chasing this shift, as has everyone else, to notebooks.
In large global enterprises it is happening first, with 30 or 40 per cent of purchasing being notebooks; there are some signs that it will pass 50 per cent. The public sector is still largely desktops, where people are office-based, cost is the key, and they don’t need a lot of mobility. But there is definitely a shift. A lot of the profitability of the desktop market has drained away as well.
If this trend is affecting Dell, how will it affect the wider PC industry?
Over the past couple of years there has been more competition. There are a lot of new competitors, and a lot of old competitors that have gained strength. But the next couple of years will be a time of industry consolidation. If you look at the profit and loss account of some competitors in the home and corporate markets, there are companies losing share dramatically. Some emerging players are starting to struggle with cash flow. We have seen a strengthening of competition, but expect to see consolidation over the next few years.
Do you expect that the launch of Windows Vista – due towards the end of this year or early 2007 – will provide a boost to the PC market?
Our big customers say they will adopt Vista, and they have plans for that. Whenever it comes out, it will shake up the market and lead to the next PC refresh stage. But the effect won’t be as dramatic as some new versions of Windows have been. A lot of firms are already focusing on technology refresh and buying platforms ready for Vista. Instead of a huge surge of buying when it comes out, they will move to Vista, so any buying decision now has to take that into account.
Some customers are excited about the new functionality of Vista, but others are indifferent and think it is overkill in their environment.
What are the big issues that IT directors are talking to you about at the moment?
One is total cost of ownership. That quickly leads to a discussion on simplification, and that leads to a cost reduction discussion. Customers are saying ‘help me through this mire of complexity, to something that serves my users well without driving complexity in the business’.
The other big theme, and this is ubiquitous, is virtualisation. Two to three years ago, the idea of a ‘scale-out’ architecture – such as buying more Intel servers – rather than ‘scale-up’, such as upgrading the mainframe, was new. Customers said they weren’t ready for it, they liked their mainframe. But the discussion now is about how to transform from there to the new architecture and get the most out of virtualisation.
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