Price War -- Dell Losing Ground To Compaq -- New Compaq promotion works to reduce inventory and beat out Dell presence at VARs By Lawrence Aragon
San Francisco-Dell Computer Corp. may be feeling push-back from VARs because of bargain-basement pricing prompted by Compaq Computer Corp.
Earlier this month, Houston-based Compaq cut prices on select desktops,workstations, servers and 15-inch monitors. Some buyers can get trade-in programs and 4.9 percent financing.
It's too early to call it a definite trend, but some resellers say they are receiving fewer requests for Dell products. "I had a customer looking for 200 Dell notebooks," says one reseller. "When I told him the prices on the Compaqs, he said, 'Give me the Compaqs. Don't talk about Dell.'
The promotion, which ends May 31, has put a damper on Dell recommendations, claims Jerry Duffy, owner of Abel Computer Repair, San Carlos, Calif. While he admits Dell's products are well-made and competitively priced, he says Compaq's recent price cuts are enough to convince him that his customers get the best value from Compaq.
Vishnu Dayal, chief executive of Micro Connections Inc., Plainview, N.Y., says he has seen a double-digit increase in Compaq desktop, notebook and server sales in the first quarter over the same period last year.
Dayal says immediate delivery of product is a critical issue to his customers. That hurts Dell, Round Rock, Texas, which can take up to two weeks to fulfill an order, Dayal says. It's only a matter of time before Dell feels the pain, predicts channel analyst Seymour Merrin of Merrin Information Services Inc. in Menlo Park, Calif. "When Compaq comes down on price, and HP and IBM follow, the difference is monumental."
Some VARs are wary, believing this program is geared to the retail and small-business markets. "For business customers, [the promotions] are more like toppings on the cake," says Thomas Mack, vice president of PC Solutions in Madison, Wis. "They're not deal-makers."
Compaq's recent price cuts to purge the channel of excess inventory will make it difficult to raise prices once the fire sale is over, Merrin contends.
Dell says it has not seen a decline in sales. "We continue to sell lots of systems," says spokesman Ken Bissell. "We still have what we consider to be a very aggressively priced product."
-Lawrence Aragon, with additional reporting by Jan Stafford and David Myron