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Compaq takes aim at Dell with server program

The PC maker is not mincing words in its latest effort to stem customer defections in its Intel-based server business.

Compaq Computer is not mincing words in its latest effort to stem customer defections in its Intel-based server business.

With the "Dell Win Back" program it began discussing publicly last week, Compaq is taking direct aim at its chief rival, organizing a virtual "SWAT" team of a dozen Compaq executives ready to help its sales force and resellers win back or protect Fortune 500 accounts.

The market for servers that use a combination of Intel chips and Windows software is growing quickly, but Dell Computer has been grabbing much of that business, analysts say. Big-ticket servers have grown increasingly important to computer makers as fierce competition has narrowed profit margins on desktop computers.

Compaq says it has gained back customers lost to Dell in the "double digits" since it launched the Dell Win Back effort two months ago. Analysts say that despite Compaq's strong product offering, however, Dell's advantages are proving tough to beat.

"Dell can provide the lowest price points and speed of delivery because of the direct model," said David Bailey, an analyst at Gerard Klauer Mattison.

Dell spokesman Jerele Neeld said his company must be doing something right to get such attention from Compaq.

"We must be taking quite a lot of business from them if they've got a specific program for it," Neeld said. Dell said it has no comparable program specifically aimed at the market leader, but he said Dell does have a more general plan for winning new business.

Compaq said it has not added any new staff for the Dell Win Back program, which targets accounts that would already have an account manager assigned to them.

"We have the resources," said Compaq spokesman Arch Currid. "It wasn't a resource issue. It was a focus (issue)."

Currid said Compaq is trying to be more responsive. For example, if customers have pressing delivery needs, Compaq wants to bring in logistics specialists to make sure the customers' needs are met. Currid said the one thing Compaq won't sacrifice to win back business is profitability.

"We didn't do it with Amazon," he said. "It's not a good business."

Compaq was left in the cold when Amazon last month announced that it was turning to Hewlett-Packard to supply 90 percent of the hardware needed to run the e-commerce giant. Compaq and Sun Microsystems had been providing Amazon's computing muscle.

The trouble for Compaq is that Dell can go after business profitably at a much lower price, analysts say.

US Bancorp Piper Jaffray analyst Ashok Kumar said Compaq will be hard-pressed to displace Dell, given that Dell's margins are about twice that of Compaq's.

"Going forward, the best Compaq can do is probably grow with the market, as opposed to gaining share at the expense of Dell," Kumar said.

Compaq's greatest strength is at the high end of the Intel server market, said Donaldson Lufkin & Jenrette analyst Kevin McCarthy.

"Fortunately for Compaq, they're still perceived to be a pretty good technology company," McCarthy said. "I think they do better on a relative basis at the high end."

Bailey said he is pleased to see Compaq targeting the fast-growing Intel server market. He said Compaq's product lineup is strong, and the company can be competitive if it can improve its pricing and delivery.

"I think it's far from certain they will be able to do that," he added.