Dell Inc.
Description
The name Dell may be synonymous with "direct," but the computer giant has a more diverse approach to the market these days. The world's #1 direct-sale computer vendor provides a broad range of computer products for the consumer and enterprise markets. In addition to a full line of desktop and notebook PCs, Dell offers network servers, workstations, storage systems, printers, projectors, and Ethernet switches. The company also markets third-party software and peripherals. Dell's growing services unit provides systems integration, support, and training. The company announced plans to begin selling through retail stores in 2007.
Entrepreneurial wunderkind Michael Dell pioneered the direct-sales model for computers and took the company from his dorm room to the top of the PC heap by keeping it focused on a simple formula: Eliminate the middleman and sell for less. Dell's built-to-order boxes allow for lower inventories, lower costs, and higher profit margins -- elements that have served it well through PC price wars and IT spending recessions. Though direct sales remain the core of Dell's business, a broader strategy has emerged since the company's founding father returned to the helm in early 2007.
Dell had ceded the CEO spot to his hand-picked successor, Kevin Rollins, in 2004. Rollins' resignation came as the company struggled with a number of difficult issues, most notably disappointing earnings and an SEC investigation into its finances. (Dell restated several years of financial results after an audit revealed accounting irregularities.) Immediately following the shakeup, Dell announced streamlining measures including a reduction in managers and the elimination of 2006 bonuses. In mid-2007 the company announced plans to cut its workforce by 10% over the next year. It also confirmed plans to exit the flat-panel television business.
The changes at Dell have not been limited to cost-cutting, however. Since returning, Michael Dell has overseen an aggressive campaign to strengthen the company's market position. After years of seeing competitors attempt to emulate its success with the direct-sale model, Dell is now looking to expand its channel sales. In 2007 the company announced plans to begin selling two desktop PC models in Wal-Mart stores in the US and Canada. Previously Dell's retail presence was limited to a display-only store in Dallas, and informational kiosks in malls and airports. Soon after the Wal-Mart announcement, Dell confirmed plans to expand its retail push to partners worldwide.
Advanced Micro Devices, Inc.
Description
Advanced Micro Devices (AMD) has made some advances in its battle against Intel. AMD ranks #2 in PC and server microprocessors, far behind its archrival. Though Intel commands about three-quarters of the world processor market, AMD has at times eroded that market share thanks to the popularity of its Athlon and Opteron chip families. AMD is also a top maker -- in rivalry with Intel, Samsung Electronics, Toshiba, and others -- of flash memory chips, which are key components of electronic devices such as cellular phones. AMD also makes embedded processors and other chips for communications and networking applications. Hewlett-Packard accounts for 23% of sales.
AMD and Intel have engaged in extended processor pricing wars that have depressed the sales figures of both companies. Their intense competition has led many of the biggest computer manufacturers to embrace the processor lines of both companies in their products, keeping each chip maker on its toes.
After posting a net loss of $611 million on lower sales in the first quarter of 2007, partly due to price cutting, AMD laid off 430 employees, nearly 3% of its global workforce. The company has cut costs in other areas, such as slashing its 2007 capital spending budget by 20%, and raised capital by selling $2.2 billion in notes. The capex cuts are mostly falling on a new corporate campus in Austin, Texas, pushing that project back for a few months, and not necessarily delaying projects to expand production capacity.
In 2006 AMD acquired ATI Technologies for about $5.4 billion in cash and stock. Buying ATI, a leading supplier of graphics processors, gives the company a broader product portfolio to better compete against Intel. AMD exchanged around $4.3 billion in cash and 58 million shares of its common stock for ATI's shares and stock options.
AMD has ambitious plans for integrating ATI's products and technologies into its offerings. The company will meld the central processing unit and the graphics processing unit of a computer into a new processor design code-named "Fusion." AMD expects to start rolling out Fusion processors for consumer electronics, desktop and laptop computers, servers, and workstations in late 2008 or early 2009. The Fusion chips will be compatible with AMD's other processors.