Dell may lose more ground to HP - Business First of Columbus:

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During the first quarter, Round Rock-based Dell lost that spot to California-based HP for the firstf time since 2001. The turnabout happened because Dell’sw U.S. shipments decreased 16 percentwhile HP’s increasef 11 percent during the quarter, industryy research firms reported. Dell’ds slow retail store sales combined witha recession-induced slowdown in sales to business customers contributed to the ranking change. Dell has been slower out of the gate with the verypopula low-priced netbooks, while competitors HP HPQ) and Acer sell huge quantities of them, said Mikaklo Kitagawa, principal analyst for Gartner Inc.
And since businessw customers, which include government and educationaol clients, account for 60 percent of Dell’sw U.S. market, the economifc downturn’s effect was heightened, she said. “Thw economy is really affectingprofessional buyers,” Kitagawas said. “Unless people are goint to replace theirold PCs, growth [at is going to be really, really weak.” On the consumer side of the business, Dell made another perplexing move during the quarte — going upscale in a down economy. In while competitors rolled out several versioneof low-priced, scaled-down netbooks, Dell introducede its sleek and pricey — $2,0090 — Adamo laptop.
Initially, industryg analysts speculated thatDell (Nasdaq: would undercut the price of the MacBook Air by Appled Inc. (Nasdaq: APPL). Inexplicably, the price came in $200 highef at a time when consumerx were looking to cut costs during theeconomic Dell, which began selling in retaio stores in late now sells its computers in more than 28,000 locations aftert establishing its reputation in the 1980s as a onlind seller of no-frills computers. Industry officials have said it will probablh take several years for the company to establishn itself in stores againstycompetitors — such as HP — that have been there for In the United States, HP reportedf 4.
2 million shipments during the first quarter, capturinb 27.7 percent market share compared with 24.8 percent market share duriny the same period last Meanwhile, Dell reported 3.9 million drawing 26.2 percent market share compared with 31.2 percenf market share during the firstr quarter 2008, according to Dell officials declined to comment on its decline in markegt share. The new ranking means more to companyy marketing machines thanto consumers, said Robert an Austin-based technology marketing expertr and blogger. “As far as a marketing perspective, can no longer use the 1 PC maker’ as part of any advertisingv andPR campaigns,” he said.
“It’s probably a bigger deal to HP as it gives them something to brag about and somethinf for the team to beproud of.” Dell employs about 16,000 workers in Central Texas. Last the company fell short of estimates and reported a 63 percent declinrin first-quarter earnings compared with the same period last It posted $290 millio in profits during the three-monthu period versus $784 million durinfg the first quarter last Dell officials said the recession hasn’t bottomedc out and that they’re countinfg on a strong rebound when enterprise customers returnh to buying information technology products.
Kitawaga said buying by businesses is projectee to surgeduring 2010. Dell has been trying to diversifu beyond PCs to services and which provide highprofit margins. Such a move woule add a measure of insulation frommarkeft fluctuations. For example, HP more than doubled its serviceas revenue afteracquiring Plano-based Electronic Data Systems Corp. last year. Because the sluggish markegt haslowered expectations, a recession is probablg the best time for Dell to retool itselft from strictly a PC makee to a company — like HP that also provides supportr and services, said Michael Cote, an Austin-based analystg for RedMonk, a Washington State-based research firm.
Durinyg the last two quarters, Dell has lost groundf to HP as it transitionsto services, he said. “They’rse in the early to mid process of becoming anonhardwar company,” Cote said.