Dell covets HP-Compaq customers

Dell Computer will look to capitalize on customer confusion created by the proposed merger of Hewlett-Packard and Compaq Computer, its CEO said.

Though his comments were guarded, Chief Executive Michael Dell, speaking on a conference call sponsored by Morgan Stanley on Friday afternoon, made it clear that Dell would look to snap up HP and Compaq customers.

With the merger, Dell asserted, HP-Compaq customers should be asking themselves: "Is there any lack of clarity here in terms of product lines or brands or support...that might affect your decision-making?

"Certainly our teams are going to be in full account-acquisition mode, as we always are, and appropriately addressing the fears and concerns that may be out there for our customers," he said.

On the other hand, Dell also acknowledged that the combined HP-Compaq entity could present a threat.

"There's certainly a number of questions that could be raised," he said. "But the combo could also represent a formidable competitor."

Dell also showed optimism about the PC market. The PC maker has gained market share at double-digit rates of late, using aggressive price cuts. But it still faces a difficult PC market because of the slow U.S. and world economies.

Dell, when asked whether things are expected to improve for the third quarter, responded, "We'll have to see."

Gartner analyst Mark Margevicius says that the acquisition of Compaq by HP likely won't revive the fortunes of either company in PCs because it doesn't address the two main competitive threats: Dell Computer and IBM. see commentary

"We're feeling good about our business and not a lot has changed since our conference call," he said, stating at another point in the call, "I don't see that happening. The business seems to have stabilized."

Dell executives gave rather guarded third-quarter estimates during the company's recent second-quarter earnings call.

Though the market may have begun to stabilize, price pressure continues to be a threat to Dell and other PC sellers, analysts say. Although Dell didn't comment on the ultimate effect of price cuts on his company, he noted that the pace of discounts isn't slowing.

"Component pricing continues to come down. We've also been able to drive a lot of efficiency in our business...and that helps us drive cost down," he said. "So no, I don't see price declines stopping. In fact, there may be areas we start intensifying" price cuts.