February 2008 Archives

Well, Dell has reported its latest financials, and the numbers show it's struggling against chief rival HP. There's little doubt HP has been a long-time channel favorite and has built a lot of loyalty over the years, while Dell is a late entry to the channel game and created a lot of early bitterness with its "Dell Direct" strategy. Ironic that now the channel is poised to play a key role in Dell's future growth prospects.

Marketwatch has an interesting take on the issue of Dell vs. HP. Dell's 4Q sales really weren't that bad, coming in at $15.9 billion, up from $14.4 billion one year ago. (The Street expected $16 billion, and it hates to be disappointed.) PC sales grew 11 percent and notebook sales rose 13 percent. But to illustrate Dell's struggle, HP notebook sales skyrocketed about 50 percent last quarter. Hmmm. Dell needs some help. Time for channel players to strike a deal?

On the eve of an earnings report from chief rival Dell, news about HP's channel challenges are still ricocheting around its partner conference in Las Vegas.

Emphasizing the point that the channel may well determine the final answer to who wins the U.S. market share battle, HP or Dell, HP officials sound like they are about to launch a channel love-in.

Dell is the next major channel player set to report its numbers. Fourth quarter results are scheduled for release Thursday, but what will be more significant is Dell's 1Q projection, since those numbers are more likely to reflect results from its recently launched channel program. Dell and HP are battling for mind share among resellers and retailers, and HP has a big lead in both those areas. Still, Dell is expected to report a 13 percent revenue increase for the last quarter (ended Jan. 31), which would put it above $16 billion in quarterly sales. If  Dell hopes to catch HP, it will need to spike sales through VARs and other channel partners.

What recession? Hewlett-Packard Co., a long-time channel giant, posted profits and projections that are the envy of many technology vendors. The company reported a 13 percent jump in revenue over last year for its first quarter ending in January. That beat analyst estimates. HP executives also say they expect second quarter revenues to outpace Wall Street expectations. HP CEO Mark Hurd raised guidance in Q2, noting "our confidence in anticipated cost reductions and share gains in key markets."

All of this good news might have a halo effect on other channel vendors, especially those wth a global customer base (which seems to be fueling the sales growth.) The good news for the channel was that notebook revenue shot up 37 percent over the prior year; desktop revenue jumped 15 percent; and enterprise server and storage revenue grew 9 percent. Even services revenue enjoyed an 11 percent boost. All in all, it looks as if companies are still willing to invest in useful technology and services, a fact sure to bolster resellers.

Distributor Ingram Micro proved a point last week for all channel companies: Even record profits can't deter a skeptical Wall Street financial community. The company reported a 24 percent increase in fourth quarter earnings, as quarterly sales leaped past $10 billion for the first time. However, even that didn't help the stock in the current bearish climate.