Dell lives in Intel parallel cosmos

Distie model prevents domino pizazz

Spooky parallels between the Intel and Dell business models underline the quarterly results the Texan firm delivered to Wall Street late yesterday (See Linux and notebooks boost Dell revenue).

But the press release issued by the Dell Corp spoke volumes, or, should we say limited volumes, about its share in the desktop PC market.

Instead, Dell harped on about its Web strategy, and its increased sales of high margin server products, workstations and notebooks.

Dell, which we dubbed Intel's chief distributor round about a year ago, is the only major desktop domino that has refused to dabble with the alternative x86 processor from AMD.

In Dell's own words, for Q2: "Combined sales of notebook computers, workstations, servers and storage products accounted for 49 percent of total system sales, the company's highest level yet and a nine-point increase over last year's second quarter. At the same time, Dell believes it extended its leading market-share position in the business-desktop computer category."

The shortages of Intel desktop "Coppermine" processors throughout the year has, evidently, hit Dell but the firm has managed to somewhat rescue the position by concentrating its efforts on different business areas and cutting costs.

But even server growth did not show the percentage growth of the same quarter last year, amounting to between 45-50 per cent, compared to the 85 per cent it managed last year.

Michael Dell, Dell's CEO, said that his firm expects to meet its targets for the complete financial year.

It is probably oversimplistic to say that Dell might have managed to equal its desktop missing revenues, and make up the missing nine per cent on desktop sales, if it had decided to follow IBM, Compaq, HP and the others by second sourcing AMD processors.

One reason for that is because Dell and Intel go together like love and marriage, and second sourcing AMD chips would cause scandal in the family. Rambus is the extra spice that has brought sparkle to the relationship in the last year - while the three don't actually make up a menage a trois, they have shown great intimacy over the last three quarters.

Dell said that region sales in its Americas region rose by 27 per cent, but the picture is more worrying in Europe, with only ten per cent growth. It managed to improve its margins by cutting costs in our region. But the position in Asia is less clear.

Although Dell said that sales in Asia Pacific rose 48 per cent in quarter two, it bundles Japan into the equation. All it would say about mainland China is that sales were up 86 per cent, year on year, without giving a base figure for that growth.

While Dell's results were slightly better than Wall St analysts had expected, the results dragged down other technology stocks, with AMD, Rambus and Intel share prices all showing declines. ®

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