Dell Aims to Dethrone Compaq as Number One PC Vendor

Strategic Insights -

Michael Dell's company, Dell Computer Corp., is quickly closing in on Compaq, its Houston-based rival, to become the world's top personal computer vendor. Despite Compaq holding the top spot, Dell has made significant strides, thanks to its direct-to-customer sales model and impressive sales gains. Dell's sales have increased three to four times the rate of the PC industry overall, solidifying its position as a major player in the market. Meanwhile, Compaq is struggling to maintain its market share, despite a 39 percent increase in shipments, as it deals with excess inventory and a subsequent price slash.

Key Takeaways:

  • Dell's direct-to-customer sales model has contributed to significant sales gains, increasing three to four times the rate of the PC industry overall.
  • Compaq, the current market leader, has struggled with excess inventory and price slashing, resulting in a 1 million PC lead over Dell in first-quarter shipments.
  • Dell's sales have increased 52 percent to a record $3.9 billion in the first quarter, with earnings climbing 54 percent to $305 million.
  • Dell's Internet sales have grown to $5 million a day, fueling the company's continued success.
  • Compaq's focus on protecting its market share and recouping profits from excess inventory may hinder Dell's chances of overtaking it in the short term.
  • Despite its success, Dell's advantage in direct sales is diminishing as competitors begin to adopt similar models.

Statistics:

  • Compaq has led Dell by 1 million PCs in first-quarter shipments, according to Dataquest.
  • Compaq accounted for 12.5 percent of global PC sales, while IBM held 7.6 percent and Dell 7.3 percent in the first quarter.
  • Dell's Internet sales have grown to an average of $5 million per day.
  • Revenue for the first quarter at Dell was up 52 percent to a record $3.9 billion.
  • Earnings at Dell climbed 54 percent to $305 million, or 44 cents per diluted share.

Sources:

  • Dataquest
  • IDC
  • Compaq Computer Corp.
  • Dell Computer Corp.
  • IBM Corp.