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US PC giant Dell Inc is facing an exodus of top executives from its China operations that could affect its business in one of the world's most dynamic PC markets.

 

Dell yesterday said Junlin Liu and Amit Midha will replace David Miller, president of Dell China, who "has left Dell."

 

David Miller's resignation followed that of his co-president, Foo Piau Phang.

 

Foo left Dell last October and joined local PC maker Shenzhen HASEE Group Co Ltd.

 

Miller will reportedly join Chinese top PC maker Lenovo, which could deal a big blow to Dell.

 

Last December William Amelio, Dell's Asia-Pacific and Japan president, joined Lenovo as chief executive officer.

 

Speculation has been rife that Miller's resignation is related to Dell's underperformance in China; but this was denied by a company spokeswoman.

 

Dell has been performing "pretty well" in China, she said, adding Dell China's PC shipment and revenue increased by 40 percent and 29 percent respectively in the latest fiscal quarter.

 

But analysts said Dell's business in China is slowing down.

 

According to Beijing-based research house Analysys International, Dell's share of China's notebook PC market grew to 9.4 percent in the second quarter compared to 9.2 percent in the previous quarter.

 

Its share of the desktop market slipped to 7.5 percent from 8.3 percent.

 

"Dell's notebook growth, in fact, is part of an industry-wide boom," said Li Chong, an analyst with Analysys International.

 

"Dell is facing hiccups in China due to the inadequate localization of its direct-business model."

 

Dell has been successful in implementing its customer-focused direct model in many countries, but such a practice has not been well received in China, Li said.

 

Unlike US consumers, Chinese are usually reluctant to open their wallets if they cannot experience the consumer products they wish to buy.

 

Dell China executives have been trying to diversify the model by bringing in distributors and resellers.

 

This may have caused disagreement between Dell China and its US headquarters, which could partly explain the exodus of its top executives in China, Li said.

 

Lenovo has taken on Dell since it acquired IBM's PC-making business, learning from the US firm's direct model to cut costs.

 

"Lenovo is now taking a diverse approach to China's PC market, which is geographically complicated. But Dell is still insisting on the purity of its direct model," Li said.

 

Dell's woes are in stark contrast to rival Hewlett-Packard, which has successfully introduced both a distribution system and a direct selling model to its China operation.

 

HP China has managed to grow both its notebook and desktop shipment in the second quarter.

 

But Steve Felice, president of Dell Asia-Pacific and Japan, defended Dell's direct model.

 

"We are growing strongly and profitably, because more and more customers in China are recognizing the superior value of direct relationships with Dell," he said.

 

(China Daily August 17, 2006)