Dell Inc says it’s not ceding second place in the global personal computer market to Acer Inc (宏碁).
Last year, Dell lost the No. 2 spot to its Taiwanese rival, putting it behind Acer for the first time. In the fourth quarter of last year, Dell had 12.4 percent of the global market, according to market research firm IDC, compared with 13.4 percent for Acer and 21 percent for Hewlett-Packard.
While Acer Chairman J.T. Wang (王振堂) is already talking about closing the gap with Hewlett-Packard, Dell isn’t giving up on recovering its No. 2 spot, says Stephen Felice, Singapore-based president for the Dell division focused on consumers and small and mid-sized businesses. And Dell hopes to claw back lost ground without sacrificing profitability.
“We are not ceding that second place,” he said on a conference call with reporters. “We see a way to get back to leadership position, but will do it in a more measured way.”
Dell executives want to avoid following in the footsteps of Acer, which has grown thanks largely to its strength in low-cost netbooks and other inexpensive computers.
“Acer has had a focus on low-end products, but the operating margin they work at is substantially lower than ours,” Felice said. “We don’t think that’s the right strategy for our shareholders.”
Even so, Dell’s fourth-quarter profit dropped 4.8 percent to US$334 million, the company reported on Thursday. Its gross margin of 17.4 percent, excluding some items, was also below the 18 percent projected by analysts. And the profit picture isn’t likely to improve soon.
Margins “will be under pressure short term with increased competition from the likes of Acer and, to a lesser degree, Hewlett-Packard,” said Ashok Kumar, an analyst at Northeast Securities Inc.
Dell fell US$1.02, or 7.1 percent, to US$13.41 at 2:31pm in New York NASDAQ Stock Market trading. The shares were little changed this year before Friday.
Dell’s comeback strategy hinges partly on China and India. The company had sales of about US$4 billion from China, Felice said, making China the second-largest market for Dell behind the US. Sales grew 81 percent in China, which now accounts for 7.5 percent of the total.
Last November, Dell released its first-ever smartphone, the Mini 3, with state-owned China Mobile Ltd, the largest mobile-phone operator in the country. Dell, which also began selling the Mini 3 in Brazil, plans to release it in the US with AT&T Inc this year.
“We are in very early stages” of the smartphone business, Felice said. “But we have had good sales results in China.”
In PCs, Dell’s improving Chinese sales haven’t translated into improved market share. Felice said Dell got a big boost from the Chinese government’s stimulus package, which promoted purchases of computers.
“The stimulus has helped,” Felice said. “A lot of it was aimed at small businesses.”
That’s a segment of the industry where Dell has traditionally been strong. However, Dell’s market share in China fell to 8.2 percent in the fourth quarter of last year compared with 9.5 percent a year earlier.
Dell was the only one of the three biggest PC makers in China to lose share: Lenovo Group Ltd. grew to 33.4 percent from 30.8 percent a year earlier, IDC data said. Hewlett-Packard rose to 14.3 percent from 10.9 percent.
Felice also discussed Beijing’s attempt last year to force PC vendors to include Internet filtering software with their computers in China. Dell was prepared to provide the software, known as Green Dam, Felice said.
“If customers wanted that, we would provide it,” he said.
However, Beijing backtracked from the requirement after an outcry from computer users inside the country.
Now, “it’s really a nonissue for us,” he said.
India is a smaller market than China for Dell. The company’s Indian sales were about US$1 billion, or 2 percent of Dell’s total revenue. Dell is No. 2 in that market with a 13.6 percent share in the fourth quarter, says IDC, compared with Hewlett-Packard’s 16.2 percent.
Dell is narrowing the gap: In the fourth quarter of 2008, it had 11 percent and Hewlett-Packard had 15.6 percent. Dell intends to expand in India as the government increases spending on healthcare, education and revamping its information-technology systems.
In India, the public sector “is critical to our overall strategy,” Felice said.
It may also play a role in helping Dell keep from losing more global share to its Taiwanese competitor.
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