Too many cooks spoil the broth ~ The Dell Case

113

Who here hasn’t heard of Dell? The Texan computer corp is everywhere. Or should I say, was everywhere. Dell, like its competitor Hewlett Packard, ran monopolistic PC sales-and-repair markets back in the day. And they got into laptops. And stagnated.

The world’s “number three PC maker”, as Dell is called, just a 79% profit plunge for the first quarter of the year — to just $130 million. Quarterly operating income for the division fell 65% year on year. The reasons are always the same – a decline on “desktop and laptop sales”. In the meantime, Micheal Dell is battling hard to buy out the company that he created and turn it back onto a profitable track. In short, Dell is dying by inches. We’ve seen the effects in Sri Lanka a long time ago: the steady disappearance of cast-in-stone “branded” systems in favour of cheaper (and often more powerful) customized builds by vendors.

Why, though? Why all this stagnation?

1) Times have changed, and Dell hasn’t. They’re suffering from declining desktop and laptop sales. This is because, on the desktop market, their offerings tend to be vastly overpriced and utilize parts that only Dell can replace, leading to a massive amount of hassle for the consumers. This Mac-like approach worked a long time ago, but not anymore. A lack of industry standard components, connectors make Dell machines hard to buy and harder to maintain.

Laptops? Dell laptops arrived too late to make headlines. It was late to the Ultrabooks game. The only consistent facet of Dell’s laptop arm are the Alienware laptops (Dell acquired Alienware in 2006).

Dell also hasn’t shifted to match the insanely fast-growing portable computing market. Laptops? Where are the Dell tabs? What do they have to match the cheap and affordable tablet devices flooding the market? Heck, Amazon, Apple, Samsung got in and got rich. Dell’s traditionally closed and secretive mentality has led them to ignore the Android / iOS revolutions and plod along the same weary path year in and year out.

This is not to say that Dell did not make headway. In fact, Dell pioneered some crucial tenets of the hardware industry, including the “build to order” concept that would go on to become an industry staple. They just stopped moving some time ago. As a consequence, others overtook them with ease. Asian markets like us were recaptured by other companies.

2) Being a publicly owned company. This means that Dell is answerable to every Tom, Dick and Harry who owns shares. Money is one thing, but tech is another. The weight of so many judges – some of whom know little or nothing about the tech industry – is preventing Dell from acting with speed and vision. It’s like the proverbial “building your house to every man’s wishes.” Apple or Google-esque visionary tactics are apparently a thing of Dell’s past. Which explains why Micheal Dell is trying hard to turn Dell into a private company again.

3) Enterprise services. Dell’s future is here: that’s what the numbers say. That’s the only crowd where you prefer relying on one company to do damn near everything for you. Dell should have dropped the low-yield consumer segment and gone after enterprises instead of racing Asian manufacturers to the bottom of the profit pile. Why this hasn’t happened cycles back to number 2). It’s literally a case of too many cooks spoiling this particular broth.

4) Asian market penetration. This is something everybody, I mean everybody, ignores. You’re going to overlook the largest population centers of the planet when running a multinational business? Seriously? If you look around, HP laptops have cemented themselves firmly here in Sri Lanka: other Asian countries are neatly covered by Asus, Lenovo, Samsung, Apple … simply put, they’ve paid attention, run great marketing campaigns, and as a consequence have sold stuff. When was the last time you saw a Dell advert?

5) Overpriced, underpowered. The classic argument against branded PCs.  This is more true in Dell’s case that in any others. Look at this, for example:

image01

That’s 900 dollars – almost 121, 000 rupees – for a badly balanced computer with entry-level graphics, when that same amount of money will net you a powerhouse capable of handling any application with ease. Without a monitor, too. Slap retailer / import costs on that and you’re looking at 140K worth of underpowered stuff. The Alienware branding has been turned into a mere marketing gimmick for things like these.

No wonder Dell isn’t selling as many desktops as they’d like. After all, lemons are lemons and overpriced stuff is still overpriced stuff.

 

 

Have something interesting and IT related to share? email the [email protected]

Article-ad

LEAVE A REPLY

Please enter your comment!
Please enter your name here