(FORTUNE Magazine) – Compaq, the world's leading PC maker, has a slight identity crisis. The company ships more personal computers than anyone--but others, especially Dell, are catching up. Dell's 58% growth rate in U.S. unit shipments for 1996 was almost double Compaq's 30%, according to International Data Corp. Of course, in an industry growing 15% a year, Compaq's performance has hardly been shabby. Still, Compaq seems worried. So worried, in fact, that it's overhauling its sales strategy in order to do the unthinkable: be more like Dell.

There are two kinds of PC makers: those that sell directly to customers, like Dell, and those that sell through independent dealers and distributors. Dell builds a PC only when a customer orders it and thus, unlike Compaq, isn't saddled with excess product if it misjudges one of the industry's blink-of-an-eye product cycles. "The direct companies beat up Compaq and other indirect companies last year," says SoundView Financial analyst Mark Specker. "The big story this year is that almost everybody's going to try to meet the direct model." Compaq has been testing changes to its distribution operation to duplicate some of Dell's strengths and is dramatically expanding its heretofore tiny direct sales force to deal with big customers. It is also likely to start configuring PCs and shipping them directly to end customers, though resellers will still make the sale.

Compaq is already more profitable than Dell. (One reason for this is that Compaq's product line is higher-end.) In January, Compaq reported that gross profit margins rose to 24.4%, the highest level in two years; Dell recently reported a rate of 22.3%. If it successfully revamps distribution, Compaq will take yet another step toward CEO Eckhard Pfeiffer's goal of dominating PC computing.

--David Kirkpatrick