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How Dell is really an Intel distributor…

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In the last eighteen months, we've seen Compaq and IBM hastily re-arrange their business models in a desperate bid to stave off competition from the company they consider the Great Satan of Hardware, Dell. To help to do so, Compaq, for instance, re-negotiated deals with fifteen suppliers in Taiwan so they could compete, on a direct basis, with Dell. IBM has been doing the same as well as striking deals with the devil itself -- in this case, Dell. HP, too, will spend an additional large sum of money next year with Taiwanese companies to source parts and machines. So why has Dell got these big companies, and a whole flume of second,third, and fourth tier vendors, on the hop? Part of the answer is to do with Dell's particular relationship with Intel but also on how it conducts its business. In many respects, Dell is more of a distributor rather than a PC manufacturer. It has large buying power and good logistics, coupled with a model which means that its suppliers get paid a fair while after its products ship. These distributor tendencies have made Dell one of the most disliked companies in the "channel", that is the network of distributors and dealers who offer (or offered) fulfilment to PC manufacturers with a more conventional model, such as Compaq and HP. We know that it was with a great deal of reluctance that Compaq moved to a model more like Dell's. IBM is traditionally a fickle player with its channel partners. Big Blue picks the petals off the channel daisy with the words: "We love them, we love them not". Dell's relationship with Intel is long-standing and long-lasting. Not only does it buy Intel processors but it also uses Intel motherboards, and not otherboards. The disadvantage of that position was demonstrated by the i820 Caminogate debacle. But Dell gets good prices for its mobos, and when the i820 Rambus problem is fixed, it will get good availability and good prices to boot. It also has excellent hooks (APEs?) into Chipzilla central and that gives it an edge over the other big boys too. Is this a level playing field? Was there ever such a thing either in ballgames or in the PC industry, we wonder. It depends on your spirit level. ®

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