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Tuesday, October 24, 2006

Dell Gets Another Headache

Once IBM sold its PC business to Chinese-based Lenovo group, many computer customers thought they would note see much of the ThinkPad or its offspring. They would become part of the Asian IT landscape.

Well, think again.

Lenovo has signed a marketing agreement with the National Basketball Association to build its brand. Most of the company’s products sold in the US and Europe still have the IBM name, but that agreement expires in a little over three years.

It is not like Lenovo signed a deal with the NFL, but that could be next.

Lenovo currently has about 6% of the world’s PC market, although its share in China is about 35%. Hewlett-Packard has just under 15% share worldwide, and Dell has just over 16%.

Lenovo is not going to overtake Dell anytime soon, but the last thing the big PC manufacturer needs is more competition. With a falling stock price and dropping operating income, the company is viewed by most on Wall St. as losing the critical PC wars to Hewlett-Packard. Over the course of the last year, Dell’s stock price has dropped from a 52-week high of $33.22 to $23.45. Over the same period, HP’s stock has gone from a low of $25.53 to it current $39.86, right at its 52-week peak.

With another horse in the race, Dell’s problems just got worse.

Douglas A. McIntyre can be reached at He does not own securities in companies that he writes about.

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