Dell CFO: Competitors Stepping It Up

At the same time, he said, rivals have begun closing the cost-structure gap.

"We still have the best customer service ratings and highest customer satisfaction," said Dell CFO Jim Schneider, speaking at the Raymond James IT Supply Chain Conference in New York. But, he said, those rankings "have come down somewhat. We acknowledge it."

Schneider suggested the combination of high-volume unit sales, but lower average selling prices, has created a squeeze on support resources.

"We really have to step up our call center operations," Schneider said.

Schneider spoke less than a week after Dell reported its third-quarter earnings. The Round Rock, Texas-based PC maker's profit dropped 28 percent from the year-ago period, with the company citing slow sales in Europe and its overall consumer business as factors. Dell also reported that its desktop sales declined by 2 percent on a year-over-year basis.

"We were obviously a little disappointed with the revenue we turned in," Schneider said, adding that the results were in the range of expectations. Much of his presentation at the Raymond James conference took a cautiously optimistic tone, saying the company has seen its rivals become more competitive with Dell's cost structure, but some are also facing similar profitability challenges.

"I believe our competitors have made progress on the cost side," Schneider said. "I think people have gotten tougher on their cost structures."

However, Schneider said other vendors had been shipping record numbers of units in the quarter while sacrificing profitability. "Take someone like Acer," he said. "Great growth; their profitability actually declined. Their margins actually declined."

Among the factors adding to the market pressure, Schneider said, was a market that was driving system pricing down faster than declines elsewhere.

"I think commodity component cost declines were very moderate," Schneider said. "And I think average selling prices declined more than that." He said that he believes Dell, with its direct sales model, still maintains a cost advantage over rivals but said, "it's probably narrowed somewhat."

Among the company's cheerier areas was its professional services business, Schneider said, which saw 35 percent revenue growth during its most recent quarter, as well as growth in printer supplies.

Schneider said that in the printer arena, Dell is seeing a greater amount of revenue from highly profitable consumables than it had planned. However, he said that the printers it bundles with system sales generate less consumable sales than printers it sells on a stand-alone basis. "Over time, I could see this being real profitable," Schneider said.