Dell's dog days of summer

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Consumers have savaged Dell over the past year or so for its poor customer service and support. Although this year the company made it a priority to correct those problems, it's not clear how long it will take Dell to regain consumer trust.

During Dell's last disappointing earnings conference call, Rollins announced that Dell would spend $100 million to hire new support personnel and retrain existing employees. Turnover has been abysmal within Dell's customer support organization, and the company has finally recognized that it needs to improve this crucial link to customers, said Roger Kay, an analyst with Endpoint Technologies Associates.

One other reason that Dell's earnings will be far lower than expected could be the amount of investment happening behind the scenes to improve not only support but product design, Kay said. There's lot of work going on inside Dell to improve the look, feel and performance of its products, he said. "They are doing a lot of engineering that they might not have been doing in the past."

Dell has also been unable to shift its revenue burden away from the PC market in favor of higher-margin businesses like servers and enterprise services. And within the server market, for example, a sizeable segment of the customer base has shifted from buying generic rack-and-stack servers, to looking at things such as manageability software and ease of use, said Illuminata analyst Gordon Haff. Dell offers manageability software but doesn't emphasize it as much as competitors do, Kay said.

"Plain vanilla boxes that are cheap to buy aren't completely out of vogue, but there are other considerations," he said.

Despite all the bad news, Dell's challenges are hardly insurmountable, said Forrester Research analyst Ted Schadler. The company already has taken actions such as simplifying its discount and rebate strategies to give consumers a better idea of the price they'll pay when they come to Dell's Web site, he said. Dell also plans to experiment with two shopping mall-based company-owned stores that don't carry inventory but give buyers a chance to try out Dell gear in person.

And, of course, financial markets aren't known for their restraint. "Wall Street always overreacts. They run up one side and then they run up the other side like a bunch of lemmings," Kay said.

Dell for years poked fun at the rest of the PC industry, while the company grew at more than 20 percent despite a sharp industry downturn. Now Dell is faced with the reality that it might have to change its stripes a bit to compete in a new era. The company has spent the last several years trying to convince the press and analysts that it is more than just a PC company, that servers, storage and enterprise services will help it continue to grow. But when things go astray in the PC market, it's very clear just how dependent Dell is on the product that vaulted it to prominence.

Even in the PC industry, what comes around, goes around. Michael Dell told a conference crowd in 1997 that Steve Jobs should consider shutting down a struggling Apple Computer and returning the money to shareholders. Jobs is probably smiling today.

Michael Kanellos contributed to this report.

[Da Coyote]

Dell and Laptops

For the past 8 year or so, I have purchased a home laptop to
complement my work machine. These laptops were Dell. None
experienced hardware failures. Software failures, were a
different story. After becoming sick and tired of having to reload
software, redo drivers after a new program was installed...and
dialing India for help, I finally got an Apple Ibook. 'Nuff said.
This one is going on 3 years old. No reboots. Ever. No
crashes...ever. Viruses - yup, I know they're out there, but no
problems yet. When I get something at work that doesn't work, I
usually ship it home. Again, has always worked on my Apple.
My house has gone from a 5 machine - all Dell/Microsoft to 3
Apples/OS-X, one Dell/Microsoft, one Dell/Red Hat, and
counting. As soon as Crossover gets perfected so that I do not
have to own any MS OS, I'll transition to an almost Microsoft free
(and so far, malfunction free) environment.

[john55440]

Dell Disappoints...

>Dell on Friday again disappointed its investors<

As for customers, they have been disappointed by poor customer service, poor technical support, and poor product quality.

I switched from Dell to HP, and my next computer is definitely going to be another HP.

[cheap_jeff]

Intel inside (only)

If Dell offered AMD versions of it's desktops and laptops, my last three personal PC purchases would have been Dell. Instead, I've gone with HP via Costco and eBay. At work, it's mainly Dell only. But no need to settle for Intel only at home.

No need for new machines

At home and at the office I don't have a further need to upgrade, our PCs are over 3 years old and running just fine. I don't need the latest from Dell or Microsoft. Frankly when I make my next purchase it probably won't be Dell again. I am sick of calling India for tech support, I'm sick of playing games to get the best prices. After buying my Axim I got annoyed with the various gimmicks to get a discount. Gateway may be out of the competition picture now, but Dell has gotten lazy IMHO and allowed innovation to slip and prices to creep up to the point that they are no longer a great deal. But the services is the bottom line for me, I will not do business when I get tech support from a person I can not understand on the phone - that is the deal breaker for me.

No need for new machines

At home and at the office I don't have a further need to upgrade, our PCs are over 3 years old and running just fine. I don't need the latest from Dell or Microsoft. Frankly when I make my next purchase it probably won't be Dell again. I am sick of calling India for tech support, I'm sick of playing games to get the best prices. After buying my Axim I got annoyed with the various gimmicks to get a discount. Gateway may be out of the competition picture now, but Dell has gotten lazy IMHO and allowed innovation to slip and prices to creep up to the point that they are no longer a great deal. But the services is the bottom line for me, I will not do business when I get tech support from a person I can not understand on the phone - that is the deal breaker for me.

[microsoft slayer]

Just got a MacBook Pro

and I"m never going back to Winbloze and Dell!

[craig_wagner]

Analysts are lemmings

The article is absolutely right about one thing, analysts and Wall Street are lemmings. They set their 'expectations' (which often seems like a number pulled out of thin air) and then when a company doesn't meet those 'expectations' they punish them. Maybe we should do away with 'expectations' and focus instead on how the company is doing in general. I'd say $14 billion is nothing to sneeze at, and IIRC Dell has money in the bank. Hmmm... maybe Dell doesn't need as much fixing as the 'experts' (who, BTW, aren't in the industry) think.

[john55440]

Analysts are lemmings

I'm anti-Dell, but to put things into perspective:

According to IDC, Dell's Q2 2006 USA market share is 34.2% compared to 4.8% for Apple.

Things could be worse...

Go HP! :-)

[Too Old For IT]

The Lemmings Expect Corporations to be Sheep

... and to have a strategic vision no further than this coming Friday's "earning guidance" conference call with the analysts.

"That must be the tenth alienist they've had on Williams. Even if he wasn't crazy before, he would be after ten of those babies got through psychoanalyzing him."

-- Porter Hall, as Murphey in "His Girl Friday"

[BeamerMT]

Dell support

Dell shouldn't be shocked. I have had so many problems with Dell since i purchased almost 2 years ago, and I am not the only one. Dell still has a name but its constantly being tarnished by poor customer service, poor technical support, and a poor sales staff. I dont like being treated like i'm stupid and i dont like being lied to which dell does constantly. I've even been hung up on by sales staff because my address didn't match their records which were several months out of date (yes i updated them). Dell just needs to start listening to their customers again.

[Macsaresafer]

No way to differentiate.

What's the difference between a Dell XPS system and somebody
else's $300 Windows PC, other than the ability to run more
viruses a bit faster? None, really. Sure the $300 machine may
have a slower processor, less RAM and a smaller hard drive, but
so what? They both run the same OS with the same litany of
problems. One just runs the viruses faster!

Windows PC Makers aren't so much computer companies as PC
assemblers. They don't really design these things so much as
slap a bunch of parts (made by other companies) together. They
don't even own the OS!!! In a situation like that, it's just a race to
see who can make the cheapest box. That's a race nobody wins,
not even the buyers, because the cheapest box has to include
support from the cheapest labor pool. Don't be surprised when
you can't understand the tech support person for your Dell or
any Windows based PC ? it's what you bought into when you
bought the box.

[fearless345]

In the "old" days in was all about service

I worked for a major computer manufacturer and before that I was a customer of that manufacturer. We did not chose that particular brand because of price; it was not the cheapest. What sold us was service. The company itself recognized that service, not price was key. The company was recognized by the industry as having the best customer service and support of any of the major computer manufactuers.

Those days are gone, as one reader pointed out, this has become a race to the bottom, and service and support naturally have become the victims of this. Basically when you, as a consumer customer buy a windows PC, you are buying this with the implied understanding that you are on your own.

[extinctone]

An example of Dell service, why they suck.

My HDD died. Using Maxtor's tools I test and see there are bad sectors all over the disk. I call Dell, they won't replace the drive. The support idiot says I have to reformat the drive and wait for it to die again before they will replace it. F_ that, it wasn't worth my time dealing with those idiots for the $50 it cost to replace the drive on my own.

[gfsgeek]

Why, oh why ??

Let's analyze this:
Take the support and ship it offshore, make PC's look really affordable only to dissappoint the buyer when the price skyrockets after all the "customizations," show apathy to customer complaints...... it's a recipe for disaster. It does not matter how big your company is.. customer service eventually catches up with you...shall I name a few?.... Dell, of course, MCI, MBNA, Home Depot .... WAKE UP management - when the foundation is weak (yes - your customer service is your foundation)- YOU WILL TOPPLE OVER!

[Penguinisto]

Waiting for Vista? A hypothetical:

I think that commercial buyers (esp. business IT departments) are likely holding out for Vista to see if it's even worth doing in a business environment, or if they can just continue to use their current hardware and put the saved $$$ into training workers to use Linux or BSD on their desktops, and just keep using XP until it dies for those instances where, say, a custom-built or niche-built Win32 app is still necessary.

It'd be a safe bet to make, considering that a lot of businesses are feeling rather burned over Microsoft's Software Assurance...

/P