IBM

Encompassing products ranging from mice to mainframe computers, the computer hardware industry serves an equally wide range of customers -- from consumers purchasing PC peripherals to multibillion-dollar global corporations installing entire networks. Accordingly, industry players include companies that focus exclusively on enterprise or personal computing, as well as companies that successfully cater to both markets. Market definition plays a key role in a sector marked by frequent acquisitions, rapid spending swings, and bitter price wars. Highly diversified vendors like IBM and Hewlett-Packard (HP) bolster themselves against a volatile hardware market with product and market breadth. Not exclusive to the Western hemisphere, the bigger-is-better strategy is also practiced by Japanese conglomerates such as NEC, Fujitsu, and Toshiba. Having such diverse product lines not only provides some insurance, it also allows technology vendors to be one-stop shops for enterprise customers with equally diverse needs. This model might at first sound like the technology market's equivalent to Wal-Mart, but high-tech products require high-tech services, and these organizations include highly trained (and highly lucrative) armies of consultants and support staff. Of course such sprawling operations can also breed inefficiencies, and these companies must constantly evaluate the viability of every operation, weighing internal and external benefits. For many years IBM maintained a PC business that produced little or no profit. It finally sold the unit to Lenovo, at the same time forming a close partnership to insure a seamless customer experience. Others have achieved market leadership by focusing on a particular product group; examples include Cisco Systems (IP networking), EMC (data storage), and Sun Microsystems (UNIX-based servers). But even these companies have expanded far beyond the core product lines that made their fortunes. Once known only for corporate and telecom networking, Cisco has turned its attention to dominating home networking; EMC, once one of the purest hardware plays, used its cash to become a leading provider of storage management software; Sun, traditionally one of the most adamant proponents of proprietary technology, now offers Windows and Linux-based systems. Such transformations are necessary for survival. For every market leader there's a hard-charging challenger armed with lower prices or a rival technology. Juniper Networks managed to steal market share in mighty Cisco's core router market, EMC has felt pricing pressure from companies such as Hitachi Data Systems, and Sun Microsystems faces a two-front assault from UNIX vendors and the all-threatening Intel/Microsoft juggernaut. In the PC market HP and Dell rule -- HP through a variety of sales channels and Dell using its pioneering direct-sale model. Companies lacking the size to compete in the escalating market share race rely more on product differentiation and branding. With an eye for aesthetics and its user-friendly software, Apple survived with this tactic even before it became the reigning king of digital music. Companies such as Gateway, lacking both a unique offering and the scale required to effectively compete on price, have been forced to scale back operations. Some believe that computer hardware has essentially become a commodity, a valid description of some hardware markets where products differ very little and margins subsequently shrink. The disk drive market, for example, has seen manufacturers compete in intense price wars. The battle between Seagate Technology and Maxtor ended only when Maxtor was acquired by its rival. Battles waged for the hearts and minds of hardware buyers often center on competing software standards. While the most high-profile example in the PC realm was the war waged between Apple- and Microsoft-powered PCs, similar clashes occur in other sectors. In the PDA market devices running the PalmSource operating system contend for share against devices featuring Microsoft's handheld OS. The enterprise computing market has its own set of standards issues, from competing storage networking technologies to the server OS contest between UNIX-, Windows-, and Linux-based systems. Regardless of the product being offered, the intrinsic boom-bust nature of the tech sector challenges hardware companies to constantly reexamine the way they do business. Hardware sellers are increasingly turning to contract manufacturers, finding the outsourcing of the actual construction of components cost-effective. The even more predominant trend is a branching out into ancillary services. IBM paved the way with great success, a fact not lost on countless hardware vendors that have come to recognize recurring service revenues as a cash cow. Some companies have gone as far as to completely transition from selling hardware to offering integration and support services. In a robust economy leading hardware companies look to global expansion, seeking opportunities in countries such as China, where markets have yet to be saturated. Acquisitions also fuel growth, and in bull markets companies such as Cisco harvest new technologies and key personnel by acquiring startups. Consolidation is not limited to prosperous periods, however. During lulls, consolidation, often in the form of asset buyouts, sweeps the industry as hardware makers await the next upswing.

CrossTexAcross the Gulf of Mexico region of the US, Crosstex Energy is hard at work pushing natural gas. The company gathers, transports, treats, and processes natural gas through more than 5,000 miles of pipeline, nine processing plants, four fractionatiors, and 190 gas treating plants. Its revenues are generated through the purchase and resale of natural gas from more than 40 independent producers located along the US Gulf Coast from Texas to Florida. Through its treating division, Crosstex cleans carbon dioxide and hydrogen sulfide from natural gas, enabling it to meet pipeline quality requirements. Crosstex Energy Inc. owns and controls the general partner of Crosstex Energy.RETURN