On top of that, Compaq must head off the threat from Dell, the super-efficient direct marketer. Well, Compaq actually lost PC server market share last year. It's no wonder the battle is so fierce. And it's expected to leap ahead by another 27 percent this year. That compares to less than 20 percent growth expected for desktop PCs.
Gross margins are also vitally important.
Servers yield margins ranging from 20 percent to 60 percent. That compares to desktop PC margins from the high teens to the low 20s. The challenge for all the competitors is to give corporate customers all the service and support they're used to from giants such as HP, plus the low prices and ease of installation they've come to expect from the PC vendors, such as Dell. It's especially difficult for pure-play PC companies such as Compaq. Compaq is rising to the occasion, though.