INTERVIEW-China Passes Japan as Dell's No. 3 Market
Fri Nov 11, 2005
By Doug Young
SHANGHAI (Reuters) - Dell Inc. (DELL.O: Quote, Profile, Research), the world's biggest PC maker, said on Friday that China had overtaken Japan to become its third-biggest market for unit sales, and sought to dispel talk that its Chinese business was stumbling.
China passed Japan in Dell's fiscal third quarter through Oct. 28, putting it behind only the United States and Britain in terms of unit sales, Bill Amelio, Dell's Asia Pacific chief, told Reuters in an interview.
"China for the first time has become the biggest market for us (in Asia) in terms of shipments," he said. "It's number three worldwide."
"It'll be a while (before it passes Britain)," he added.
Amelio said that Dell expected its share of the China PC market -- the world's second largest -- to be in "the 9 percent band" in the third quarter, versus 9.6 percent in the second and 7.3 percent in the third quarter of 2004.
He declined to give specific figures. But with nationwide PC sales of 5.1 million units in the third quarter, according to International Data Corp, Dell's 9-10 percent of the market would equate to about 500,000 units.
Chinese PC sales are expected to grow 14.9 percent this year from the 15.8 million units sold in 2004, with another 14.6 percent growth expected in 2006, according to IDC.
Amelio downplayed recent speculation that after several years of rapid growth Dell's sales were stumbling in China, where it competes with the likes of leader Lenovo Group Ltd. (0992.HK: Quote, Profile, Research), Hewlett-Packard Co. (HPQ.N: Quote, Profile, Research) and Taiwan's Acer Inc. (2353.TW: Quote, Profile, Research).
That talk was fueled by the recent departure of the company's long-serving Chinese chief and market rumors of layoffs, as well as disappointing global results for the company, which posted a 28 percent drop in third-quarter earnings on Thursday.
In its global third-quarter report, Dell said its China unit sales jumped 46 percent from a year earlier, while revenue climbed 29 percent. Amelio attributed the faster growth in unit sales to falling prices in the highly competitive market.
"I simply think (the talk of problems in China) is because we had two quarters in a row, as a company, where we didn't quite meet the expectations of analysts," Amelio said.
"People then go looking for the bogeyman ... There must be an issue somewhere, so even without the facts they make a position," he said.
He said the departure of Foo Piau Phang as China chief was something that Foo had brought up about nine months ago and was Foo's idea. He added that talk of widespread layoffs in China was untrue.
In fact, he said, Dell is still in "hypergrowth" mode in China, with an ultimate aim of taking over the top position from Lenovo, which now controls about a third of all sales in the country after its recent purchase of IBM's (IBM.N: Quote, Profile, Research) PC arm.
"With only 10 percent of the market, we have plenty of room to grow," he said. "It's clear sometime, somehow we'd like to be number one ... We're just aspiring to do what we've done everywhere else in the world: to be number one."
He added that Dell is now roughly equal to Lenovo in China in terms of profitability, without elaborating.
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