Dell boss threatens price war

James Vanderslice, president of Dell, said that the company is to launch a full-scale price war with the channel to improve market share, but went on to contradict himself by saying that the company may buy a business with an indirect sales model.

James Vanderslice, president of Dell, said that the company is to launch a full-scale price war with the channel to improve market share, but went on to contradict himself by saying that the company may buy a business with an indirect sales model.

Speaking at the company's headquarters in the US, Vanderslice said Dell intended to take advantage of falling PC component prices which have resulted from the slowing economy to increase pressure on its competition.

He added that component prices were falling by about one per cent each week, and were savings that Dell could quickly pass on to customers with its direct sales model. He claimed that falling prices would reach the end user within three days, compared with up to 60 days for Dell's indirect rivals.

"This is going to be Bosnia," said Vanderslice. "Our game is to play hardball. Why not? This is not a price war, it's a cost war. Who knows what the endgame is? But when you're grabbing up market share like this, it's the chance of a lifetime."

In addition, Dell, which Vanderslice claimed has almost $8bn in cash reserves, is looking to splash out on a "strategic acquisition", and has not ruled out purchasing a business with channel ties. The Dell culture is so strong "you've got to expand it beyond the direct model", he said.

Trevor Pugsley, hardware manager at Computacenter, said: "There is a big noise being made by Dell right now, but so far I have not seen it on the streets. Dell has an advantage in that it does not need to price-protect its channel to ensure margin, but stock levels in both direct and indirect models are falling. That means price savings through either model can be passed on quickly to customers."

Dave Atherton, Dabs.com's managing director, agreed. "Dell has always been strong on price but the market they target is not just about price, it is also about services, maintenance and value-add. Here Dell cannot compete with the channel. Customers purely interested in price tend to go with original equipment manufacturers and see Dell as an expensive option," he said.

Atherton was also sceptical of any move by Dell to purchase an indirect company to add a channel strategy to its business model. "I'll believe it when it's more than just talk," he said.

Also published in Computer Reseller News