Word: delle
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...strong reason for that, analysts say, is Dell's ability to undercut the competition's prices without sacrificing profit. By making machines only after receiving an order, Dell can keep inventory low and turn it over quickly. That reduces overhead and the risk of getting caught with unsold, out-of-date models. Conventional manufacturers, including Legend, build machines according to forecasts of market demand. If predictions are wrong, a lot of unsold hard-ware can pile up in the supply chain...
...Witness the carnage after the sharp, unexpected crash on corporate I.T. spending late in 2000: losses convinced IBM to all but abandon in-house PC manufacturing by farming assembly out to subcontractors. Hewlett-Packard and Compaq are trying to merge. Dell was hurt by the downturn, too. The company laid off 1,700 workers last year, its first redundancies ever. But it still managed to increase sales by 18.3% in 2001, showing a profit of $2.1 billion...
...advantages Dell enjoys over giants such as IBM could prove decisive against Legend as well. Founded in 1984 by 11 computer researchers from the Chinese Academy of Sciences, Legend has rapidly grown into Asia's largest PC maker by riding a boom in mainland computer sales. Although it manufactures in China, where labor costs are cheap, it lacks Dell's economies of scale. Legend's revenue last year was $3.5 billion, puny compared with Dell's $31.9 billion. Dell's 17.6% profit margin similarly dwarfs Legend...
...appears that Dell can undercut Legend's prices despite China's protectionist tariffs. The American company offers a starter PC for $97 less than Legend's comparable entry-level model. Any pricing edge enjoyed by Dell could increase over the next several years; China's entry into the World Trade Organization means tariffs on imported PCs will decline from 13% to zero...
...spreading itself too thin, Legend may be playing right into Dell's hands. So far, most of the market share Dell has captured has come from rival foreign brands in the corporate client space and not from Legend itself. Now Dell has to start pushing its way into the consciousness of ordinary consumers and mid-sized corporations, where the next wave of mainland computerization is cresting. But selling desktops to the masses is Legend's turf-and Dell might find it's a long march to total global domination...