Dell versus Hewlett Packard

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There is a war shaping up that involves two giant companies facing off, and soon there will be three. The war is between Dell Computer, and Hewlett Packard for supremacy in the personal computer world. The first battles have been fought, and clearly Dell has been the winner for years. The next battle seems to be shaping up as we write this, and Dell seems to be victimizing itself with recalls, and lackluster customer service at best.

For more than a decade Dell has eaten Hewlett Packard for lunch in the world of personal computers. Any analyst will tell you that Hewlett Packard makes a disproportionate share of its bottom line from selling ink for their printers. They sell the printer probably at a lost just to get the ink resupply business. If you buy a HWP machine, they dont even include a printer cable in the box. They would like to because it only cost a dollar or two. What happens instead is that stores like Best Buy, Circuit City, and others demand that the cable not be included. These stores sell the cable as a separate item for $20 to $30 depending on length. Not a bad markup, pay a dollar or two, and sell it for $30. The stores make more money on the printer cable, than they make on the printer.

Carly Fiorina, the former Chairwoman of Hewlett Packard developed a corporate strategy that was working. The Board simply got tired of her. Today the current Board is implementing her strategy and its working.

Dell meanwhile has had a tremendous fall from grace. Dell really doesnt manufacture anything. They are an assembler and a shipper. All manufacturing is done overseas in an attempt to remain the low cost producer. Through the years, Dell was so superior at this that some of their financial metrics were meaningless. As an example, one of the things that analysts like to know is how long it takes you to pay your bills. Dell turned the whole concept over on its head.

Lets look at an example. You order a computer from Dell, and pay for it immediately by credit card. They have your cash. Dells suppliers ship the components for that machine before there is any money due them by Dell. This means Dell gets your cash, and may not have to spend that cash for months. The usable float amounts to billions of dollars. So why has Dell fallen from grace. It comes down to this. When you play by the edge of the table, sometimes you fall off.

Dells customer telephone service centers in India are failing the American consumer miserably. They may speak English, but they do not understand our culture, and they do not get the job done, as far as consumer satisfaction is concerned. In the end, consumer satisfaction is everything. People vote with their feet and the consumer is voting to buy somebody elses machines, namely Hewlett Packard is the main beneficiary.

The consumer is now becoming aware that certain Sony manufactured notebook batteries sold by Dell from April 2004, until July 2006 are capable of exploding and causing a fire. A Dell recall is now in effect involving 4 million PC batteries on a world-wide basis, of which 2.7 million are in the United States.