DELL COMPUTER, KING OF mail-order personal computers, is the envy of the industry. In 1995, Dell eclipsed IBM to become the second-biggest seller of desktop PCs to corporate buyers (only Compaq Computer is larger). This year's sales are rising at twice the rate of the overall PC market.

Much of Dell's success can be attributed to the low costs associated with the direct-sales approach, which allows it to avoid keeping many different models on hand. Dell assembles a machine only after a customer has ordered one.

So IBM and Digital Equipment are drawing a bead on the Austin (Tex.) company. Starting in January, the two will introduce modular PCs. These will be shipped without the high-cost microprocessor and memory installed: Dealers will install the pieces when an order is placed. The idea is to reduce inventory to as little as 14 days from the current 35 days.

The modular approach will still not beat Dell's 12 days of inventory. So IBM and DEC also hope to outdo Dell by selling more varied packages of PCs, networking gear, and software. They had better hurry. Dell's rise to a projected $7 billion in revenues this year from $5.3 billion will let it match the volume-purchasing advantage of its larger competitors.

By Gary McWilliams


Updated June 14, 1997 by bwwebmaster
Copyright 1996, Bloomberg L.P.
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