Perspective: A Dell rebound--not so easy

When it comes to timing, the tech gods do work in strange ways.

There you had Google, the latter-day incarnation of the 1927 New York Yankees, tripling its fourth-quarter earnings on an obscenely strong 67 percent revenue gain. Less than an hour later, Dell, the one-time leader of the pack, issued an earnings warning and announced that founder Michael Dell was replacing Kevin Rollins as the company's chief executive.

A tale of two companies on a funky Wednesday.

Google does software, and Dell does hardware. The companies contend in entirely different realms. So at first blush, there's really not much to connect the two. But surface differences aside, both companies really do share a common DNA. Both charged out of the gate as ballsy upstarts and exploited a genius insight about their respective businesses before rivals could react.

For Google, it started--but did not end--at search. That was only a springboard. Others like Yahoo and AltaVista were in the search business a lot earlier but too slow to compete. Same went for Microsoft, which talked a great game about software as a service.

Fact is that Google did a better job putting the idea into practice. Now it's even branching into Web-based office applications, Microsoft's very bread and butter. The reality is that some, perhaps many, of Google's new ventures may fail, but there's no rush--not when the company's sitting on a hoard of more than $11 billion in cash and marketable securities.

Dell's misfortune is that its original gene pool mutated in the wrong ways. But for most of its 23-year history, the company was a scrappy outfit that gave fits to bigger, more established (i.e., self-satisfied) rivals.

Dell's salad days seem like an eternity ago. But we're not talking about ancient history.

In the early days, few people outside of Michael Dell believed he was destined to come out atop the heap. In fact, when Dell began what was first called PC's Limited, he wasn't breaking new ground. In 1984, there were already a number of mail-order computer companies jockeying with each other. Dell wasn't even first among equals. He had to battle his way past street-smart entrepreneurs like Northgate's Art Lazere and Greg Herrick at Zeos and Ted Waitt over at Gateway 2000.

It took less than a decade for Dell to establish its primacy and then set its sights on IBM, Compaq and Hewlett-Packard. At first, these fat cat companies were in denial. They couldn't believe a direct marketer could ever eat their lunch. But that's what happened.

There's an endless debate among historians whether the times make great leaders or whether great leaders paint their own canvasses. In this case, maybe it was a bit of both. By the time Dell was ready to expand into new businesses, PCs were no longer esoteric items. As a second generation of computer users entered the work force, most computer users no longer required specialized hand-holding from resellers.

The mainstream computer companies relied on so-called value-added middleman who tacked on unnecessary cost. But as PCs morphed into commodities, price and distribution--Dell's strong suit--put the big guys on the defensive. What's more, Dell could reconfigure its models on the spot to meet individual tastes. Before long, the IBMs of the world were struggling to keep pace in a cost game they couldn't win.

Dell's salad days seem like an eternity ago. But we're not talking about ancient history. The company took a wrong turn only a couple years back. First, there were problems with after-sale service. Instead of fixing the problem, the company denied its existence. Then it turned defensive. And then, inevitably, it lost customers.

Product quality issues also surfaced with annoying frequency. Laptop design, in particular, was a problem--above and beyond the recall of 4.1 million notebook computer batteries. Recurring complaints about the products came while Dell's rivals were learning how to squeeze expenses out of their business process. All the while, Dell faced a resurgent HP, a nimble, aggressive Lenovo and an Apple with a penchant for pulling rabbits out of its hat.

Now Michael Dell is back at the helm, but the Wall Street guys are making too much of a fuss about his return. He's not a miracle worker and any recovery is going to take time.

Of course, there's no reason why Dell can't rebound from past mistakes. The company recovered from a painful stumble in the early 1990s. But the technology industry has changed a lot since then. Even if Dell regains its form to the point where its service and distribution are the envy of the computer industry, can it again make customers excited about its products?

Solve that last question and life becomes a lot easier.

Biography
Charles Cooper is CNET News.com's executive editor of commentary.

More Perspectives

[Yukimi Konomi]

mike hasnt run anything since???

mort?

right???

or ro?

[georgescott]

Dell should open a couple of custom pc stores

Apple has it's Apple stores where you can buy the company goods off the shelf.

Dell promotes custom PC's. They need to get there "mojo" back so to speak, so they open a couple of super fancy looking stores and inside you pick the parts to go into your computer. They only need 5 or 10 stores maximum in downtown areas.

This would not be the Gateway store concept, Gateway opened too many stores that became a drag on the bottom line.

Of course Dell needs to fix there other problems like customer service.

[tundraboy]

You need a certain level of product cachet to do that.

Dell opening custom stores is like a drugstore brand makeup like Max Factor opening up their own boutiques.

[Gomphos]

Dell has opened their own stores...

...two of them, in fact. They're both located in malls which also
have Apple stores. One is in Texas. I forgot where the other one
is.

The problem is the model: you can't walk out of the Dell store
with a computer. It's actually more of a showroom.

[terrylc]

Dell's Problems Arise From Michael's Prior Reign

Dell's technical support started being farmed out years ago to people whose first language was not that of the customer, "script kiddies" whose actual knowledge of the product, even of computers, was minimal. And of course Dell like others has been good at blaming software so it is no longer Dell's responsibility/problem to make the product work. Memo to Michael Dell: As Albert Einstein pointed out, "Insanity: doing the same thing over and over again and expecting different results." If you're going to continue to do things that alienate your customers, your company is going to continue to tank.

[john55440]

Dell vs HP

I was VERY annoyed when my high-end Dell desktop computer was dead-unrepairable after three years. I was also annoyed by Dell's awful technical support.

My HP desktop computer is now five years old, and going strong. I don't know if HP's technical support is any good, because I have never needed it. My HP Just Works.

[anebt]

Same Here

I have never had a Dell. I've had Sony Vaio, which never gave me any problems in the 8 years I used it.

Next I bought an HP and also a Compaq. I've never had to call tech support on these either. Both run superbly well, and the HP is about six years old and
runs just like the first day I tried it.

[tundraboy]

Dell is a one trick pony.

Build 'em as cheap as you possibly can. Don't invest in acquiring any real product R&D capabilities; just rely on the component makers' and Microsofts' R&D trickling down to you.

Problem with this model is eventually the Chinese will eat your lunch. And with no R&D skills in your DNA, to which segment of the market will you migrate?

[i_made_this]

Dell's problems are deeper than..

..Mike can solve as CEO. He was a pushy arrogant kid with a couple good ideas that happened to click due to good timing. That was then - but this is now - and he's suddenly at the helm of a huge lumbering battleship that's failing fast. His major problem remains the same as his competitors - the commoditization of the PC - a trend which only continue to snowball in coming years. By the time Dell solves their major issues in customer service, technical support and pricing - the three key areas where HP and IBM/Lenovo have been making mince meat out of Dell for the past few years - he's still left with the key question of what product he intends to sell at a reasonable profit. There are lots of initiatives he can consider starting but none of them will be fast enough to save the ship from sinking. His best bet at this point maybe to take the company private which will give him a chance to reorganize at his own pace rather than being forced to do so at a fire sale price by major investors and creditors.

[Kurt Saldutti]

Yes Dell can be on top again

We reminisce often on what made us feel good. Gateway in its day made us feel good about being involved with computers. Dell in a new age did the same as a way of in receiving a new powerful product that made computing fun again. As in tech cycles new ages come and go very fast and hence, we move to this new age of computing. However, the boxes are still the same in so many ways of the 80s and 90s only pepped up with new technologies. Dell needs to think way outside of the box here. Start to BTX all desktop products and even push on further into the next realm of hard-driveless systems. Laptops need to be lighter and have far better battery technologies. All laptops should come with a numeric key pad and have web cams and wi-fi finders standard. etc. etc. Dell could and has the chance to excite the customer base of their own and others but they need to get going, as they never had done before. And Dell remember (Customer service support) is one of the issues that set you back.

[hezigler]

Another Steve Jobs?

Is Michael Dell another Steve Jobs?

I don't think so...

[Michael Grogan]

What if they made good computers?

The first thing Dell needs to do is learn to make good computers. As a service tech I've worked on many different systems and Dell is invariably the worst followed closely by HP.

Dell and HP computers are usually built around a processor that sounds like it should be powerful. The problem is the processor is mounted on a main board that is the cheapest piece of junk on the market with zero upgradability and poor base performance. The peripherals follow suit. That's how they make cheap computers that look good..they're actually cheap.

I'm only surprised Dell has lasted as long as it has and I fully expect HP's computer line to go the same way. Wait until people3 want to upgrade the video on their Dell and HP boxes to accommodate Vista and find out what will and what won't fit on those sorry main boards!

[jelcnet]

arrogance gets always punished

read back a long interview with Dell and its CEO in Fortune, just a few years back and the painting is on the wall, condescending masters of the universe never understood international business.. still as an internaitonal client based in Germany cannot order a notebook to be deliverewd in Italy, in Italian and invoiced to Belgian headquarters, not even to Germany ... NOTHING FAILS LIKE SUCCESS !!!