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Dell set to duel with rival HP in Russia

Texas computer giant Dell has moved into Moscow to challenge rival Hewlett-Packard at its own game.

The pioneer of the customized PC business said Thursday that it hopes to unseat HP as the top foreign computer brand in Russia by essentially copying its main global competitor's business model -- developing retail distributorships.

Although its PCs have been available in Russia for seven years, Dell's share of the $1.8 billion per year domestic market is estimated at around 1 percent, compared to HP's 12 percent. But with PC sales here growing at a rate of 15 percent per year, bucking a global downturn, Dell said it could no longer ignore Russia.

"We decided it's the right time [to boost our position in Russia] to the level it's at in other countries," said Pim Dale, sales director for Dell's European distribution division, which opened a representative office in Moscow last month.

"The Russian market has stabilized. The growth is here. It's a much friendlier environment for multinational companies now," he said.

"Why didn't we come before? We had other things to do."

Dell was the No. 1 PC vendor in the world last year with sales of 20.7 million units, or 15.2 percent of the global market, according to preliminary estimates by market research agency IDC.

Dell and HP traded places throughout the year, with Dell taking the lead in the first and third quarters, while HP led in the second and fourth quarters.

But Dell is not yet ready to commit to manufacturing here, so it has modified the direct sales model it is famous for to one that looks very similar to HP's.

In addition to its partnership with Dell Systems, which has represented the company here for years, Dale said Dell will take on two new distributors to help build its network.

Through these partners and an aggressive advertising campaign, the company is betting on the private sector to grow its market share.

"The Russian government is favoring the Russian manufacturer," Dale said, adding that this would help Dell lure international corporate clients, as well as domestic small businesses.

Dale admitted that domestic manufacturers like Aquarius and Formoza have a price advantage over Dell, but he said Dell would target second-time buyers who want more value for their money.

"We have better value," Dale said, adding that the goal is to quadruple sales this year.

To do that, however, will require taking market share from HP, which was the No. 3 PC supplier in Russia at the end of last year after Aquarius and Formoza, according to IDC.

IDC analyst Robert Farish said it would be extremely difficult for Dell to take market share from HP because that would require convincing existing HP wholesalers to sell Dell.

"This is not going to be easy," he said. "I'm sure HP will do everything it can to keep this from happening."

HP's general manger for Russia, Robert Bellman, called Dell's approach "too little, too late."

"On the surface, Dell is trying to copy [our business model], but in reality they only want to ramp up their presence in Russia and then take over [their partners'] business directly," he said.

"Not many companies will be fooled by that approach."

(The Moscow Times 21.ii.03)

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