Dell pokes at Compaq, elegizes WebPC

Meeting with reporters following his keynote at the DirectConnect conference here, Dell used every opportunity to jab at Houston-based rival Compaq Computer.

Compaq announced the merger with Digital Equipment in January 1998, in part to boost its services capability. But missteps with the merger and other factors led to the ouster of former CEO Eckhard Pfeiffer and a decline in Compaq's PC business.

Dell picked up the lost market share and last year took the No. 1 spot from Compaq in U.S. PC sales, according to market researchers Dataquest and International Data Corp. Compaq still leads Dell worldwide.

Dell's CEO responded in part to statements made yesterday by Compaq chief executive Michael Capellas, who indicated Compaq had turned the corner.

"When you look at market share, I don't think you'd see any discernable turnaround," Dell said. "The interesting thing is if you look at the top five markets in the world, Dell is No. 1 in two of them and Compaq is No. 1 in none of them.

"It seems to me this company is going to have a hard time maintaining its leading share in the world without leadership in any of the top five markets, " he continued.

Dell also addressed questions about his company's slowing stock performance by again comparing it to Compaq.

"If you take Compaq, Apple, Gateway and pull all of them together, I think it's still less than Dell's market capitalization," he said. "Four years ago, Dell's market capitalization was 38 percent smaller than Compaq's, but now it's about 65 percent more than Compaq's."

He also noted that Dell's ROIC, or return on investment capital, is 10 times that of Compaq's.

Dell also fielded tough questions about the demise of WebPC, the company's stylish answer to the Apple iMac that also led to new PC designs from Compaq, Hewlett-Packard and IBM. Dell unveiled WebPC at last year's DirectConnect event, only to pull the plug six months later because of lackluster sales.

"The reason we stopped selling WebPC in a very short period of time is because our system that captures information from customers is far better than anyone else's," Dell said.

"If you never have products that don't succeed, then you're probably not experimenting enough," Dell said. "We would never claim that everything we come out with is going to be successful. Our track record is pretty good, though."

The ghost of WebPC hangs over a new chassis design unveiled today at the conference. Dell booted beige in favor of dark gray and simplified the chassis' ergonomics. All Dell PCs eventually will sport the new look before beige is retired next August.

Dell said the company learned important lessons from WebPC's demise, mainly that customers don't want legacy-free systems, those shedding serial and parallel ports for USB.

"If you go to the customer and say, 'I'm taking away your parallel port,' the customer says, 'Can I have my parallel port back? I want to hook up a printer,'" Dell said.

The CEO of the Round Rock, Texas-based company also spoke about wireless and referred to new Latitude corporate notebooks outfitted for wireless networking.

Dell's more immediate goal is ensuring notebooks sold to corporations and educational institutions are ready to use IEEE 802.11 wireless networking, which allows the portables to connect to computer networks or the Internet over the air.

Beyond wireless local area networks, Dell is also interested in wide-area wireless technologies, such as wideband Code Division Multiple Access (CDMA) and General Packet Radio Services (GPRS).

"Our objective again here is to integrate those into our products to provide an 'Internet unleashed' to mobile notebook users," Dell said.

Longer term, Dell is looking at Bluetooth, a technology for creating wireless personal area networks, for connecting cell phones, handhelds and peripherals to portables without wires or cables.

With all the hype about Linux--the free, open-source version of Unix--Dell took a moment to address his company's position on the operating system.

"We're quite optimistic about the future of Linux," he said.

But Dell emphasized that Windows 2000 dominates server sales. Linux plays an important role, though, in competing with "proprietary Unix systems, particularly Sun Solaris," he said.

"As the non-Sun parts of the industry all line up behind Linux, there's more and more applications, system management tools, etc. that suggest it will be a great alternative to Solaris," he added.