How's this for counterintuitive: Dell Inc. (DELL) is struggling from Baltimore to Beijing but thriving in...Germany? That's right. In a country where 2% economic growth is grounds for euphoria and the PC market has shrunk 3.5% in the past 12 months, the troubled computer maker is doing better than ever.
Although it took years to get the formula right -- Dell has been selling computers in Germany since 1988 -- the company grew faster there than any of its major rivals did in the past 12 months. Unit sales were up 13.6% in the second quarter vs. a year earlier, according to market watcher IDC. From fifth place last year, Dell has moved to third, with 12.6% of the market, behind Hewlett-Packard Co. (HPQ) and No. 1 Fujitsu Siemens Computers. Of Germany's top 10 computer suppliers, only Dell and HP managed to boost sales. Alain D. Bandle, an understated Swiss who runs Dell's German operations, won't disclose profits but says the company is making good money on his turf. "The mantra of Dell is: We want to grow profitably," he says.
Funny thing, though: In Germany, Dell closely follows the direct-sales model that seems to have lost its edge in the U.S. But Dell is giving its German team room to adjust the basic formula to appeal to local sensibilities. Bandle and his team "have been given a bit more leeway, which can only work in their favor," says Gartner Dataquest analyst Meike Escherich. For instance, personal contact still counts for a lot in Germany, so over the past year Bandle persuaded headquarters to let him nearly double the workforce, to 1,000. Most of the new hires are salespeople serving business customers, who account for 90% of Dell's German revenue. That also helps boost Internet sales, since companies typically buy their first Dell machine from a salesperson but make subsequent purchases online.
Bandle also realized that Germans prefer to buy from native speakers, even though they don't mind dealing with a foreigner on technical issues. So for a new center focusing on sales to small-business and government customers, Dell chose the eastern German city of Halle over an existing facility in the Slovak capital, Bratislava, racking up PR points in the process. Dell says the center could grow to 1,500 workers by the end of the decade, a sign that it expects its German success to continue.
Consumers account for only 10% of Dell sales in Germany, but even there the company has held its own. After discovering that Germany's tech-savvy gamers love Dell's $1,800 XPS models, Bandle stepped up promotion of the machines, which soon became best sellers. And in a nation of engineers, Dell's build-to-order system has been a hit, especially compared with the typical sales channel for PCs, discount chains that buy thousands of identical computers and sell them on the cheap. That leads many observers to predict Dell's German growth story is far from finished. Says IDC analyst Elsa Opitz: "Dell offers good specs at a very competitive price."
By Jack Ewing