Dell Discusses Competition from HP (DELL, HPQ)

Includes: DELL, HPQ
by: David Jackson

From Dell's (NASDAQ:DELL) conference call last night:

Kevin Rollins

...I want to focus my comments today on what has changed in the competitive landscape and what we are doing to ensure the Dell Direct model remains the preeminent model to bring value, relevant technology, and services to customers.

We have now seen enough data over the last year to understand that the industry is going through another period of change — significant change in the short-term and certain consolidation over the long-term.

The competitive dynamic has been more intense than we planned for, or understood. Some competitors have become stronger as they eliminated inefficiencies in their models. Average selling prices in the high-volume transactional space, home and small business, particularly in the U.S., have declined sharply without offsetting component price improvements.

More than ever, customers are using service and support as a point of differentiation when making purchasing decisions. While these changes were occurring, we tried to achieve both high-growth and increased levels of profitability. This allowed competitors to improve their profitability off of low levels and in some cases accelerate their growth. While we still garner the majority of the industry’s profit pool, our growth suffered.

In the latter part of the quarter, we took a visible step with price to reassert the value of the direct model and what it can bring to customers. The elasticity in response to our pricing actions was not obvious in our quarter results, but we did see an uptick in unit growth in April.

Our plans for growth, however, are more than just price moves. Price is the simple story. We are rebuilding our model, leveraging the fundamental and unique elements that are extendable. These changes are most needed, and will be most evidenced, in our U.S. consumer business.

Excerpt from the full Dell conference call transcript.

Full disclosure: long DELL.