A Tale of Two Companies

Peter Burrows

Today, as Dell execs hunker down in Austin to ride out the negative winds swirling as a result of its preannoucement yesterday, execs from Hewlett-Packard's Personal Systems Group will be happily unveiling new laptops and other products at its Mobility Summitt at a San Francisco hotel, and awaiting the launch the following day of HP's biggest PC marketing thrust in years. No doubt, HP execs will asked to comment on the possibility that HP will outgrow Dell this quarter. That's what Merrill Lynch's Richard Farmer is suggesting may happen, when HP announces its quarterly results on May 16.

Obviously, this is pretty disorienting stuff for a long-time PC industry watcher. For what seemed like decades, it seemed to be Dell's divine right to be in the right place at the right time--with a business model tailor-made to succeed given where customers were going. And it seemed to be an unnegotiable law of the cosmos that HP would be the PC industry's troubled contender--really big and powerful and talented, but forevever unable to put it all together to land a real punch.

But it certainly seems like HP is winding up to land some painful blows in the quarters or even years to come. While Dell is in the shop trying to tweak its business model--and pretty much do a total makeover of its customer service operation--HP is taking advantage of investments it made in recent years to lower its costs and improve its operations (and not only under Mark Hurd, mind you. A lot of the work to fix this particular arm of HP began under former CEO Carly Fiorina). HP is winning awards for its customer service; maybe more important than the reality, HP now has a rep for good customer care, which Dell no longer does. And while for years it seemed "direct" was the only way to go, HP's status as a retailing giant and the leading supplier to big commercial distributors such as Tech Data and Ingram is now standing it in extremely good stead. It's able to sell to all parts of the market, giving customers from Boston and Bangkok lots of ways to buy. And HP seems intent on exercizing its innovation muscles, which have been under-utilized in the past (or at least unnoticed, given HP's staid marketing efforts). We'll know later today whether HP's new laptops are likely to be smash hits. Either way, however, Todd Bradley insists changes are in the works that live up to the message of the new ad campaign.

To me, that weightlifting metaphor is apt. HP seems to have constructed its business so that it can comfortably manage the heavy lifting to meet--or exceed--its quarterly plans. But for many quarters now, Dell seems like the guy in the gym who's got a plan to get back into shape, but whose current capabilities just won't let him get those last few reps in the air. Now, we know Michael Dell is a great strategist, and has the discipline to stick with a plan until he gets it right. But I think the market may be admiring HP more than Dell for quite a while more.