Dell Inc. (DELL): Is This Another Nail In Its Coffin?

Dell Inc. (NASDAQ:DELL) and HP are competing head-to-head with competitors that have better fixed-cost structures. Lenovo is based in China, where salaries are among the lowest in the world. Revenue is soaring at Lenovo as the company increases its market share by purchasing smaller competitors and using their scale to further reduce the fixed cost per unit.

HP and Dell Inc. (NASDAQ:DELL) need to either differentiate their products or increase the efficiency of their supply chain. Both companies are losing shipment volume and they need to act before those divisions are completely out-competed by their Asian counterparts. Whether HP and Dell are the purchasers or purchasees, we will be seeing a lot more consolidation in the PC market as time goes on.

Foolish bottom line

Hewlett-Packard Company (NYSE:HPQ) and Dell investors are pushing them in the direction of IBM, which currently has operating margins of 21%, four times those of HP and Dell. International Business Machines Corp. (NYSE:IBM) continues to shift toward a more profitable mix of revenue. The business segments that are currently floundering at IBM are the major revenue drivers of both HP and Dell. If HP and Dell Inc. (NASDAQ:DELL) keep focusing on corporate customers, they will be going toe-to-toe with large competitors like IBM and Oracle Corporation (NASDAQ:ORCL). The corporate technology space will be an uphill battle against long-term servicing contracts and years of expertise. The options HP and Dell face do not look promising, and will need to be executed nearly perfectly if these two tech titans don’t want to become the next Kodak.

The article Lenovo: Another Nail In Dell’s Coffin? originally appeared on Fool.com and is written by Wes Patoka.

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