Leading the diversified pack is computing kingpin IBM, whose success serves as an example to companies such as Hewlett-Packard (HP) that bolster themselves against a volatile hardware market with product and market breadth. Not exclusive to the Western hemisphere, the bigger-is-better strategy is also practiced by a number of Japanese conglomerates (most notably NEC, Fujitsu, and Toshiba). Bigger does not mean invincible, however. One need look no further than Xerox for an example of how far the mighty can fall.

Other companies in the enterprise sector have achieved market leadership by focusing on a particular product group; examples include Cisco Systems (IP networking), EMC (data storage), and Sun Microsystems (UNIX-based servers). But for every market leader there's a hard-charging challenger armed with lower prices or a rival technology. Upstarts including Juniper Networks have managed to steal market share in mighty Cisco's core router market, EMC has felt pricing pressure from companies such as Hitachi Data Systems, and Sun Microsystems faces a two-front assault from fellow vendors of UNIX servers and the all-threatening Intel/Microsoft juggernaut.

HP and Dell rule the consumer PC market, HP through retail channels and Dell using its pioneering direct sales model. Companies lacking the size to compete in the escalating market share race rely more on product differentiation and branding. With mixed success Apple and Gateway have survived by using this tactic, Apple with an eye for aesthetics and a user-friendly operating system, Gateway by building a reputation for stellar service and support. Both companies have also forayed into the retail business with branded stores.

However, an almost exclusive focus on consumers is what makes these companies particularly vulnerable to a cyclical market, consumers being the most sensitive to economic downturns. Some believe that computer hardware has essentially become a commodity, a valid description of some hardware markets where products differ very little and margins subsequently shrink. The disk drive market, for example, has seen manufacturers such as Seagate Technology and Maxtor compete in intense price wars.

Battles waged for the hearts and minds of hardware buyers often center on competing software standards. While the most high-profile example in the personal computing realm was the war waged between Apple- and Microsoft-powered PCs, today a similar conflict exists in the PDA sector, where devices running Palm's operating system contend for market share against devices featuring Microsoft's handheld OS. Similar conflict exists in the enterprise market, be it competing storage networking technologies or the server OS contest between UNIX-, Windows-, and Linux-based systems.

Regardless of the product being offered, the intrinsic boom-bust nature of the tech sector challenges hardware companies to constantly reexamine the way they do business. Hardware sellers are increasingly turning to contract manufacturers, finding the outsourcing of the actual construction of components cost-effective. The even more predominant trend is a branching out into ancillary services. IBM paved the way with great success, a fact not lost on countless hardware vendors that have come to recognize recurring service revenues as a cash cow. Some companies have gone as far as to completely transition from selling hardware to offering integration and support services.

In a robust economy leading hardware companies look to global expansion, seeking opportunities in countries such as China, where markets have yet to be saturated. Acquisitions also fuel growth, and in bull markets companies such as Cisco harvest new technologies and key personnel by acquiring startups. Consolidation is not limited to prosperous periods, however. During lulls, consolidation, often in the form of asset buyouts, sweeps the industry as hardware makers await the next upswing. Hewlett-Packard's historic merger with Compaq Computer may serve as the ultimate example of a defensive acquisition.