Issue #0606/2 - While Lexmark is frantically trying to counter the effects of the ‘softening demand’ it is experiencing in its markets, neither Dell nor Hewlett-Packard can see any evidence of any softening in their markets.
Both companies can be proud of their achievements:
- Hewlett-Packard can proudly continue to declare that it is the number one IT company, even extending its lead over IBM as IBM’s fortunes seemingly begin to slip away.
- With overall growth for its financial year ended January 2006 of 14%, and revenue for the quarter up 13% against Hewlett-Packard’s 6%, Dell now stands with annual revenue that is around 36% of Hewlett-Packard’s level – and growing.
Therefore, despite its solid number one position, Hewlett-Packard must not be complacent and must be wary of its smaller, direct-sell competitor, if for no other reason than because it is still experiencing growth rates that are eating away at Hewlett-Packard’s lead.
What makes Dell’s position so impressive is that both companies are in growth positions – neither is in the doldrums – but Dell is making inroads into Hewlett-Packard’s IT leadership, growing at more than double Hewlett-Packard’s rate.
Supporting Dell’s 14% growth rate for the whole year, unit sales of Software and Peripherals (which includes printers) grew by 19%, contributing to exceptional revenue growth of 27%.
Underlining the company’s success is the fact that operating income is up 13% for the year and revenue in markets outside of the US, traditionally weaker for Dell than the US market itself, grew by 21% and accounted for 43% of worldwide revenue.
Focusing on Europe, Dell claims to have increased market share in 16 of its 19 direct-sell European markets in Q4. When Europe has been one of the weaker regions for Dell, this represents good news with Europe now accounting for 24% of worldwide revenue against 21% for the quarter ended January 2003.
Clearly Dell still has some way to go in persuading the European market (EMEA) to buy Dell rather than Hewlett-Packard though. EMEA now represents around 42% of worldwide revenue for Hewlett-Packard against 40% three years ago.
Dell’s Imaging and Printing revenue grew 17% in the quarter, kept lower than other product categories by the company’s aggressive pricing strategy. Because Dell is still shy of publicising its unit growth rates for printers, we can only surmise that the claim of 11% market share for laser printers and 15% share for inkjet AiOs in the US is an indication that the aggressive pricing is reaping rather bigger dividends for Dell than a low hardware pricing strategy is for Lexmark.
While watching Dell carefully, Hewlett-Packard will probably feel less threatened by Lexmark as it watches its own IPG revenues grow at 8% in the quarter with operating profit sitting at 15% of revenue.
As part of this growth, this quarter we see supplies revenue growing by 11% - a rate that Hewlett-Packard has not experienced for a couple of years.
With unit sales growing at rates ranging from 10% for consumer units to 40% for printer-based MFPs (average 12%), Hewlett-Packard can expect supplies revenues to continue to be healthy!
~End~
