How much trouble is Dell really in?
Is it just me or was Dell on top of the world a few years ago? Not only was it pummeling just about every other PC manufacturer in the industry, its online business was buzzing and its business integration was better than ever. And then it all came crashing down.
Last year, Dell announced that it was cutting 8,800 jobs from its payroll and Thursday the company said that it has already laid off 5,550 employees in an attempt to cut costs and make the company more financially sound.
"We are not satisfied with the current state of affairs and are on a mission to fix it," Reuters quoted Dell saying. "Every area of the company is being pursued" for cost cuts.
To make matters worse, last week Dell announced that it was closing one of its desktop manufacturing facilities as part of its layoff program and indicated that it wants to reduce expenses by as much as $3 billion per year over the next three years.
And while many would say that Dell is moving in the right direction, I'm not so quick to agree. How can a company that sat atop the entire computing industry for so long become a shadow of its former self in just two years? Is it that Dell has had a string of bad luck or did Hewlett-Packard, Acer and the rest finally find a way to take the company down?
Sadly, it looks like the latter.
Over the past two years, Dell has been subject to a litany of issues that most of us never saw coming. By the second quarter of 2006, Dell commanded 19 percent of the worldwide PC market share and led its closest competitor, HP, by about 3 percent. Since then, the company's worldwide market share has slipped to below 13 percent, while Acer and HP gained ground. So much ground in fact, that HP is currently the world's largest PC manufacturer and controls almost 19 percent of the market, while Dell commands just 14 percent. And to make matters worse, HP's growth was estimated at 30 percent in 2007, while Dell's was just 1.7 percent.
So what's going on at Dell? Did it stem from its need to restate financials after alleged corporate malfeasance? Was it the fact that Dell executives relied too heavily on the company's tried and true business structure that was dominated by online and business sales? Or was it simply that Dell's popularity has run its course and HP realized what consumers want today before Dell?
Unfortunately, the answers to those questions are locked deep within the company's headquarters where Michael Dell is trying to do all he can to right the ship and turn things around. But will he?
At this point, Dell is in deep trouble. The company's stock price has plummeted in the past six months and, although it's turning a profit each quarter of well over $200 million, its practice of selling computers just doesn't work anymore.
Years ago, Dell's idea of direct selling through its telephone and online channels worked better than most thought it would. After pulling its computers out of retail outlets in 1994, some wondered if Dell would be around much longer. After some impressive quarters and a new business model emerged out of its gamble, the world became believers and both companies and consumers jumped on the Dell bandwagon.
On top of that, Michael Dell was one of the first CEOs to realize that if people used a Dell computer in the business, they would like it, understand it, and want one in the home. And although some doubted the rationale, it worked and Dell walked away from a future-proof company--or so he thought.
In recent years, Dell's tried and true business model has changed and suddenly people are more likely to buy a computer at their local Best Buy than ever before. Realizing this, Dell was forced to start selling its computers in retail outlets once again, but the company was too late--HP already owned that market.
Fast-forward to today and Dell is in trouble. Sure, the company may be turning a profit, but its growth has slowed to an alarming rate and HP is making the company look bad. But let's be honest--what can Dell do about it?
The company may be able to turn things around in retail outlets, but the computer industry has quickly become a commoditized business where a Dell desktop is the same as an equally equipped HP computer. Realizing this, a price war has emerged and so far, Dell has come out on the losing end in many of these battles, which tells you exactly why it's trying to reduce overhead and maintain costs at a far more manageable level.
Sadly, there's not much more Dell can do. In an environment where margins are extremely low and companies are forced to find innovative ways to entice customers, Dell is fighting an uphill battle. And although its revenue has grown, its growth has slowed to a crawl and things may get worse if they ever get better.
Trouble is on the horizon for Dell, and if you ask me, that's a sad development.
Don Reisinger is a technology columnist who has written about everything from HDTVs to computers to Flowbee Haircut Systems. Don is a member of the CNET Blog Network, and posts at The Digital Home. He is not an employee of CNET. Disclosure.
If you've seen one, you've seen them all. And if you stare at one all day at work, why bring one home?
I think all of your explanations have merit, but the truth is that by virtue of absorbing Compaq, HP was able to beat Dell at the race to the bottom. And that's what the PC business is. Apple benefits because they chose not to run that particular race.
Quote: ""What would I do? I'd shut it down and give the money back to the shareholders," Michael Dell said before a crowd of several thousand IT executives."
He was talking about Apple Computer. Maybe he should follow his own advice.
"Last year, Dell announced that it was cutting 8,800 jobs from its payroll and Thursday the company said that it has already laid off 5,550 employees in an attempt to cut costs and make the company more financially sound."
8,800+5,550=14,350...
Last March, Steve Jobs said that "we have 25K employees and 15K are in the stores..."
And Apple's Stores are like 5 years old.
Michell not only gave "bad advices to Apple". He gave them to himself!
Somewhere in between is the answer, Gateway, HP and Apple get it...Dell definitely doesn't.
Dell's strength has always been production, NOT design; they are paying the price now. They could bring out something to rival Apple, but don't. How about a keyboard that responds to ambient light, being backlit as it gets darker? How about a host of other design options of which Apple is the poster boy for good choices. I haven't bought an Apple due to price, BUT somewhere between the lowest cost, Crown Vic choice of Dell and the Lexus choice of Apple lies room for an attractively-designed leading (not trailing) edge PC.
Working there my experience was this:
I was lied to
Paid late on bonuses
Given no benefits.
Given no tuition assistance
Our Sales support was in Ecuador, or somewhere
My managers were inept, and under qualified.
I worked on commission for two years, and not a single person could explain the pay structure to me.
I was trained on how to word things to customers to make 29.99% Interest sound like its a good thing. And how to sell 4 year service on a desktop. People listen up. Dont buy warranties. These companies sell them because they make money off of them.
I am so glad to be gone, though. I felt like I had to fight all day when I was at work. School is good. Stay in school, kids, or you will have to work for the Dells of the World.
When my tax refund gets here...i will be at the Apple store having a farewell party for Vista, and PC.
Overall I'd say the entire industry is down, but that Dell has at least kept up standards. I need my equipment to work. Maybe they are laying people off and that's regretable. Still I'd rather buy dell than anything else on my short list.
http://www.cnn.com/2003/LAW/02/10/dell.dude.arrest/index.html
Another issue I have found is they are not supporting their products well. My company bought a data projector that subsequently has failed, but the projector is a few years old and out of warranty. The broken part on it is obvious (a reflector) and I was looking to get it replaced. Likely a $5-$10 part and perhaps an hour of labor, which they could charge me $100-$200 to repair instead of making me buy a new unit at $1200-$1500. I've actually not found anyone that is willing to look at or repair it.
I find customer service dropping significantly.
Integrated mother boards are another issue. Although other companies are also on this bandwagon, replacing an entire motherboard because the internal power supply quit is asinine. The computer works perfectly until it runs out of juice. So because of "over-integration" they are replacing more parts than are necessary, bringing costs up.
Just my 2 cents!
Another issue I have found is they are not supporting their products well. My company bought a data projector that subsequently has failed, but the projector is a few years old and out of warranty. The broken part on it is obvious (a reflector) and I was looking to get it replaced. Likely a $5-$10 part and perhaps an hour of labor, which they could charge me $100-$200 to repair instead of making me buy a new unit at $1200-$1500. I've actually not found anyone that is willing to look at or repair it.
I find customer service dropping significantly.
Integrated mother boards are another issue. Although other companies are also on this bandwagon, replacing an entire motherboard because the internal power supply quit is asinine. The computer works perfectly until it runs out of juice. So because of "over-integration" they are replacing more parts than are necessary, bringing costs up.
Just my 2 cents!
1. Waiting for that laptop to be built. My father In Law wanted a new laptop, it was a decision between Vista basic on a Toshiba, (he didn't want Vista) or a Dell with XP. He went with Toshiba because it was going to take almost 2 weeks to get the Dell.
2. The Bloatware pre-installed on the machine. I always order REAL reinstallation media, and redo the install after receiving my Dell. This is difficult if not impossible for the average user.
3. Vista- Yeah I know it is not "that bad" however after using and uninstalling it many times I still prefer XP, it does what I need it to do. I still have a Latitude C-840 that I use regularly. I don't need a new machine. I also don't think that Vista is that compelling for me to buy a new machine. Perhaps Dell was counting on selling tons of Vista capable machines?
4. Internet - My Wife, it's Outlook and the Internet. Thats all she needs to get her through the day. I am a developer so of course I love faster beefier machines, but my Precision 470 Quadcore Xeon is great even after 2 years...There is no real reason to buy another machine.
The internet also adds another spin with online services such a GoogleDocs, Live, etc. These use the browser, so who really needs more, better, faster anymore?
Michael Dell is the wrong person to be running the company, he has made no friends in the industry and is too hooked on his past glories. He has never had to turn a company arround.
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by anay3000
April 5, 2008 9:02 PM PDT
- OK, let me say this,
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Showing 1 of 2 pages (31 Comments)Dell doesnt cut any ice in India. but some time ago, they had an offer on their site that informed me of a Great and very cheap Laptop with a great processor, large HDD, and all other features that were available in the upper-mid-laptop segment, like bluetooth, wifi, etc. all this at just INR. 38,000 (approx).
I called them up on the free phone number, and was greeted by their sales person. he told me that yes, indeed, that model was available, and that it actually cost 38k. yeah, with a smile, i reached for my credit card, to order it on the spot, and then he informed me of the other charges.
delivery and octroi: - 3000
OS and other software installation: - 3000
VAT @ 14 %
and a few more charges...
total comes to around INR. 48,000.
ok, now i was pissed off. at that point, i was directly opposite a Lenovo dealership, where i got my ultra cheap 3000 N 100 @ ... hold your breath ... INR, 32,000, all charges included, but without an OS. meaning that it had DOS installed. I got an original Windows XP, and still the price did not touch INR. 40,000.
to top it off, i got charged for that so called free call (full Indian Rupees 70) i had made to dell's sales hotline, that was supposed to be free. and cellphone operators just dont care about our complaints here.
I still saved around 8 thousand bucks, and had a lappy that had the same specs as the dell, but was about 16000 bucks cheaper.
DELL, YOUR TRICKS DONT WORK ANY MORE!!! WOULD I NOW RECOMMEND YOUR BUSINESS TO ANYONE? I WOULD RATHER DERIDE IT!!!