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Direct sales keep Dell on top

Direct sales keep Dell on top

Intel is cutting jobs, Compaq is tackling an inventory glut, the Asian PC market has taken a nosedive and Wall Street is heeding warnings about a slowdown in the technology sector.

But from Dell Computer CEO Michael Dell's perch -- one that boasts revenue exceeding $US9.8 billion over the past four quarters -- the industry is humming along just fine.

"The overall market continues to be pretty healthy, and end-user demand continues to grow," Dell said last week.

He said he expects the new 350 and 400MHz Pentium II PCs to help boost momentum.

In the overall corporate desktop PC market, Dell hotly competes with Compaq and IBM for US corporate desktops. Dell sells more than $US2 million per day online.

Responding to the Dell direct sales model in the US, IBM has already shifted to offer customers the option to build to order. And top seller Compaq is struggling to change its complex channel distribution model to build to order, an effort that has resulted in inventory problems.

"Given that the value of this inventory declines 1 per cent per week, if you are caught with excess inventory, you've got a real problem," Dell said.

Compaq is finding that "the change is more than Compaq CEO Eckhard Pfeiffer standing up and saying, 'We're going to change channel strategy' ", said Kevin Hause, an IDC analyst.

By contrast, Dell is "doing phenomenally well" with direct sales, said Ashok Kumar, an analyst at Piper Jaffray.

In the workstation market, however, Dell has work ahead; about 80 per cent of the market is now held by Sun, Digital, Hewlett-Packard and IBM.


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