The Best of Both Phone, and TabletOctober 3, 2005 10:00 AM PDT
For Dell, will luxury PCs boost profits?
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pay for that luxury. How else can you explain an Apple laptop with a titanium casing? Or the growing popularity of so-called rugged laptops?
In another move that some analysts also think is aimed at shaving costs and preserving margins, Dell, in a pilot program starting Oct. 10, will stop free shipping of some lower-end PCs, particularly cheaper configurations of the Dimension product line. Customers can still get free shipping for the low-end PCs by picking them up at a local post office, and free shipping will continue for higher-end systems, depending on promotions.
The breakdown
There is a subtle science to how companies like Dell make money off their PCs, Kay said.
"Let's say that a consumer could buy a basic system for $500 that cost Dell $450 to deliver. Dell's gross profit on the sale would be $50," he said. But adding more features, like better speakers, more power, or a better graphics card, could take that theoretical price up to $1,000. Dell's cost for that bundle could be $850. Even if Dell gave the customer a $75 discount, it would make $25 more off that PC than off a cheap one.
"By increasing the value to the customer at each small step up the product line, the company encourages the buyer to stretch a little and take the next package up," Kay said.
That Dell's competitors are also becoming more efficient may also be prompting Dell to introduce its luxury line, said Moors & Cabot analyst Cindy Shaw.
"We think Dell's main rival, Hewlett-Packard, will improve its cost structure over the next few years," Shaw said. "Lenovo's purchase of IBM's PC business could result in a more competitive cost structure for that organization" as well.
Shaw said she expects new HP CEO Mark Hurd to be very focused on cost and execution, which could diminish Dell's cost advantage.
In addition, Lenovo could slow Dell's progress in Asia, particularly in China.
But selling the luxury line could be a challenge for the company that's best known for affordable computing. Buyers seeking style above all else will continue to favor Apple, Shaw said, noting that "Dell's new XPS PCs feature color choices and lights, but in our view, Apple still holds a wide lead over other computers when it comes to style."
CNET News.com's Jim Kerstetter contributed to this report.
40 comments
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casing? Or the growing popularity of so-called rugged laptops?"
You fail to answer this question in the article. Nowhere is the
fact that people don't simply buy Macs for the style of the case;
many of them are returning Apple users, and many more are
frustrated by a limitation any Dell machine has inherently: it
must run Windows.
This is the third article I've seen on the XPS line in a week
comparing the XPS line to other "style" manufacturers without
any of the obvious analysis of price/performance, OS choice or
construction quality and support.
Style is very subjective. Dell's project manager for the XPS line
called the new computers "Dell's Lexus" (I'm paraphrasing here).
I'd expect News.com to do more in-depth reporting about that
assertion and whether or not it's just another badly-flawed car/
computer analogy. A Lexus is far more than a re-badged Toyota
with a better dealership experience, but that's all that Dell seems
to be offering here.
Certainly, there's nothing wrong with having an option of a higher-marging product for a consumer to choose from, but perhaps Dell would be wiser to spend some money on improving customer support FOR ALL PRODUCT LINES.
Dell's customer satisfaction has been dropping steadily and now is on par with industry average. Whether for right or wrong reasons, very many people don't care to get support from people overseas, so Dell may be forced to bring back some of its business to the US for home side (I think it's business support had been mostly moved back to the US already).
casing? Or the growing popularity of so-called rugged laptops?"
You fail to answer this question in the article. Nowhere is the
fact that people don't simply buy Macs for the style of the case;
many of them are returning Apple users, and many more are
frustrated by a limitation any Dell machine has inherently: it
must run Windows.
This is the third article I've seen on the XPS line in a week
comparing the XPS line to other "style" manufacturers without
any of the obvious analysis of price/performance, OS choice or
construction quality and support.
Style is very subjective. Dell's project manager for the XPS line
called the new computers "Dell's Lexus" (I'm paraphrasing here).
I'd expect News.com to do more in-depth reporting about that
assertion and whether or not it's just another badly-flawed car/
computer analogy. A Lexus is far more than a re-badged Toyota
with a better dealership experience, but that's all that Dell seems
to be offering here.
Certainly, there's nothing wrong with having an option of a higher-marging product for a consumer to choose from, but perhaps Dell would be wiser to spend some money on improving customer support FOR ALL PRODUCT LINES.
Dell's customer satisfaction has been dropping steadily and now is on par with industry average. Whether for right or wrong reasons, very many people don't care to get support from people overseas, so Dell may be forced to bring back some of its business to the US for home side (I think it's business support had been mostly moved back to the US already).
Better companies to compare too are Falcon Northwest, Voodoo PC, and Alienware. All three are some of the oldest and better-known builders of gaming/hardcore systems and they have more style than any Dell. Alienware would seem to be the biggest competitor since they are more mainstream and have somewhat lower prices than Falcon or Voodoo.
From a business standpoint, I don't really see the audience that would buy these products. Most home customers want something cheap and don't care for advanced features (at least, they shouldn't if all they do is Internet, MS Office, etc.) and style. On the other hand, hardcore people would rather build a computer or buy if from the companies I mentioned earlier (or some of the smaller vendors).
Now, I know that XPS line has been around for awhile (couple of years, I believe) and it carried slightly better styling than plain fare. For Dell to continue to sell and expans XPS offerings, it must mean the sales of XPS have been solid, so I may stand corrected on my customer-base comments.
regarding Mac game developers/publishers suggest that there are
more Mac gamers out there than what is assumed. Of course I
personally wouldn't waste time and money on PC or Mac gaming
versus the game console; which is GOOD enough these days :-)
Better companies to compare too are Falcon Northwest, Voodoo PC, and Alienware. All three are some of the oldest and better-known builders of gaming/hardcore systems and they have more style than any Dell. Alienware would seem to be the biggest competitor since they are more mainstream and have somewhat lower prices than Falcon or Voodoo.
From a business standpoint, I don't really see the audience that would buy these products. Most home customers want something cheap and don't care for advanced features (at least, they shouldn't if all they do is Internet, MS Office, etc.) and style. On the other hand, hardcore people would rather build a computer or buy if from the companies I mentioned earlier (or some of the smaller vendors).
Now, I know that XPS line has been around for awhile (couple of years, I believe) and it carried slightly better styling than plain fare. For Dell to continue to sell and expans XPS offerings, it must mean the sales of XPS have been solid, so I may stand corrected on my customer-base comments.
regarding Mac game developers/publishers suggest that there are
more Mac gamers out there than what is assumed. Of course I
personally wouldn't waste time and money on PC or Mac gaming
versus the game console; which is GOOD enough these days :-)
the same thing, no matter how sweet the cases look, its still
Windows inside, and the security nightmares that go with it.
Somehow this seems to go along the lines of those nice chrome
trashcans with the flip lids, attactive, but the content remains the
same.
As for the only relevant nuggett in your comment -- Dell promises super-pooper-priority support from "top" specialists. Whatever that means, I don't know.
the same thing, no matter how sweet the cases look, its still
Windows inside, and the security nightmares that go with it.
Somehow this seems to go along the lines of those nice chrome
trashcans with the flip lids, attactive, but the content remains the
same.
As for the only relevant nuggett in your comment -- Dell promises super-pooper-priority support from "top" specialists. Whatever that means, I don't know.
Brand Name might not be everything, but don't think it doesn't count for something.
Don't think if it like Lexus, because Lexus does not retain the Toyota name. It is more like Dodge's Viper, Ford's GT, or Intel's Extreme.
If some other company makes its name synonymous with high end and Dell just becomes "the cheap brand" it could find itself going down as fast as it came up.
I think it is a strategic move for brand recognition as much as it is a method of improving profit margins.
I will also say I believe this is a smart move on Dells part.
I once suggested a while back that Gateway could use the same method to re-establish the Gateway brand PC's. With this move from Dell it looks like that niche might have been filled now.
Now I am going to predict that gateway will continue to sink as they continue to do the same thing (nothing).
also has as much to do with brand recognition."
I'm sure that this is the case, but if Dell is hoping to morph from
a "no-nonsense a-la-carte" PC vendor to a vendor which offers
two or more distinct trim levels, then they need to actually
spend money on the upper trim level and differentiate it from
the lower tier offerings. It woul dhelp if they hired FrogDesign or
another design group to actually...you know, design the
computer.
Dell has a lot to learn - Apple has been designing and packaging
computers in high style for almost eight years now, and learning
from the mistakes along the way. There are a lot of things to
watch for when you start adding "bling" to a computer or
accessory, not the least of which is that the materials can be
fragile or have special handling considerations.
Right now it's the same old Dell case with silver accents. It
comes nowhere close to the monolithic power and understated
presence of a G5 or the self-assured quirkiness of an Alienware
case. The support side of the value equation isn't inspiring,
given Dell's sinking customer satisfaction ratings.
The pictures here on News.com are difficult to draw conclusions
from, but I think it's clear the XPS won't be winning any beauty
contests when up against the the more rarefied brands popular
with style-concious buyers.
Every first attempt deserves a learned follow-up. Time will tell if
the folks in Round Rock learn anything from the success or
failure of the XPS' design language. I applaud their efforts
though; we're seeing the maturation of the PC industry in this
differentiation among brands.
Personally, I think it's not nearly enough, and front of the case
reminds me of the "artsy" anti-graffiti refacing applied to
stainless steel bathroom doors with a grinder. The XPS font is
even a little trendy, and might look "old" in a couple of years.
Aside from those things, there really doesn't appear to be much
cosmetic difference from a regular Dell at all.
Brand Name might not be everything, but don't think it doesn't count for something.
Don't think if it like Lexus, because Lexus does not retain the Toyota name. It is more like Dodge's Viper, Ford's GT, or Intel's Extreme.
If some other company makes its name synonymous with high end and Dell just becomes "the cheap brand" it could find itself going down as fast as it came up.
I think it is a strategic move for brand recognition as much as it is a method of improving profit margins.
I will also say I believe this is a smart move on Dells part.
I once suggested a while back that Gateway could use the same method to re-establish the Gateway brand PC's. With this move from Dell it looks like that niche might have been filled now.
Now I am going to predict that gateway will continue to sink as they continue to do the same thing (nothing).
also has as much to do with brand recognition."
I'm sure that this is the case, but if Dell is hoping to morph from
a "no-nonsense a-la-carte" PC vendor to a vendor which offers
two or more distinct trim levels, then they need to actually
spend money on the upper trim level and differentiate it from
the lower tier offerings. It woul dhelp if they hired FrogDesign or
another design group to actually...you know, design the
computer.
Dell has a lot to learn - Apple has been designing and packaging
computers in high style for almost eight years now, and learning
from the mistakes along the way. There are a lot of things to
watch for when you start adding "bling" to a computer or
accessory, not the least of which is that the materials can be
fragile or have special handling considerations.
Right now it's the same old Dell case with silver accents. It
comes nowhere close to the monolithic power and understated
presence of a G5 or the self-assured quirkiness of an Alienware
case. The support side of the value equation isn't inspiring,
given Dell's sinking customer satisfaction ratings.
The pictures here on News.com are difficult to draw conclusions
from, but I think it's clear the XPS won't be winning any beauty
contests when up against the the more rarefied brands popular
with style-concious buyers.
Every first attempt deserves a learned follow-up. Time will tell if
the folks in Round Rock learn anything from the success or
failure of the XPS' design language. I applaud their efforts
though; we're seeing the maturation of the PC industry in this
differentiation among brands.
Personally, I think it's not nearly enough, and front of the case
reminds me of the "artsy" anti-graffiti refacing applied to
stainless steel bathroom doors with a grinder. The XPS font is
even a little trendy, and might look "old" in a couple of years.
Aside from those things, there really doesn't appear to be much
cosmetic difference from a regular Dell at all.
The Yugo of computers is trying to build & sell a Lexus "luxury
Dell"?
HAHAHAHAHAHAHAHAHAHA!
Good one.
=8-)
" IDIOT! " ...Napoleon Dynamite
The Yugo of computers is trying to build & sell a Lexus "luxury
Dell"?
HAHAHAHAHAHAHAHAHAHA!
Good one.
=8-)
" IDIOT! " ...Napoleon Dynamite
'style' on a box stuffed under the desk is mostly irrelevant. If you
want cheap, goto Dell or Walmart. If you want powerful, goto the
specialized builders, or build one yourself. Dell is NOT the answer
here.
'style' on a box stuffed under the desk is mostly irrelevant. If you
want cheap, goto Dell or Walmart. If you want powerful, goto the
specialized builders, or build one yourself. Dell is NOT the answer
here.
check out the top500 supercomputing site <a class="jive-link-external" href="http://" target="_newWindow">http://</a>
www.top500.org/lists/plists.php?Y=2005&M=06
Let's see 2200 Macs make #14 in the ranking and where's Dell?
There they are 2500 Opterons come in at #20 with 2/3 the
computing power of the 2200 Macs. And at about double the cost.
check out the top500 supercomputing site <a class="jive-link-external" href="http://" target="_newWindow">http://</a>
www.top500.org/lists/plists.php?Y=2005&M=06
Let's see 2200 Macs make #14 in the ranking and where's Dell?
There they are 2500 Opterons come in at #20 with 2/3 the
computing power of the 2200 Macs. And at about double the cost.
It's about as idiotic a comparison as the Patriots of today vs the Steelers of the 70s or the Niners of the 80s.
It's about as idiotic a comparison as the Patriots of today vs the Steelers of the 70s or the Niners of the 80s.