Dell President and Chief Operating Officer James Vanderslice last week declared an all-out price war in a push to gain more market share and potentially drive the company's competitors out of business.
Vanderslice said Dell's direct sales model makes the company better positioned than its competitors to take advantage of falling component prices in today's sluggish economy. Dell narrowly beat out Compaq as the world's No. 1 PC maker in the first quarter.
"This is not a price war, but a cost war. Component prices are falling 1 percent a week," he said at an analyst and press briefing at the company's headquarters in Round Rock, Texas. "And we can take the cost reduction and pass that on to our customers.
"Dell's direct model is wreaking havoc in the industry," he continued. "We gained more market share in the first quarter than we did in the last six quarters. This is a tough game. We have tremendous momentum. Our competitors are falling by the wayside."
Compaq had a resolute response to Dell's declaration.
"Compaq will not allow Dell to win our customers away," said Keith Lefebvre, head of the workstation and thin-client division at Compaq.