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The Round Rock, Texas-based company on Wednesday unveiled its XPS brand, a luxury line of computers that will compete head-on with high-end PC makers like Alienware and even Apple Computer.
Some analysts interpret the move as an indication that Dell, which rocketed to the PC industry's top spot by building an efficient manufacturing operation that enables it to sell computers for less than its competitors, wants to feast on the fatter margins that come with selling snazzier gear. Prices for the XPS systems start at $1,099, while prices for the long-running Dimension PC line can go as low as $400.What's new:
With its new XPS line of PCs, Dell is taking a shot at the high end.
Bottom line:
Considering that PC components are already at rock-bottom prices, the Texas company is hoping to pump up its margins with the luxury brand. But can it lure style-consious consumers away from Apple Computer?
But why bother? After all, Dell's margins seem to be holding up. In its most recent fiscal quarter, which ended July 29, Dell said its operating margin was 8.7 percent of total sales, up a tenth of a percentage point from a year ago. And sales were up 15 percent to $13.4 billion.
Still, in an industry whose customers expect prices to keep on dropping, even the most efficient of companies, at some point, will find that it's becoming difficult to maintain a healthy profit.
"There is probably no other business on earth in which buyers continually expect more for less," said Roger Kay, president of the tech analysis firm Endpoint Technologies Associates.
Moore's Law, which argues that the number of transistors in a silicon chip doubles about every two years, has held up for many years and still has some life left in it, Kay said. Moore's Law also means that the cost of producing that better performance inversely drops--and it has over the years. But costs of other basic components, such as cases, fans, frames, power supplies, and a multitude of diodes and resistors, are already at rock bottom and aren't going much lower, Kay said.
"It's pretty clear that (Dell) needs to go after those high-margin markets if it wants to maintain its profits," said Nicholas Carr, author of several tech industry books, including "Does IT Matter? Information Technology and the Corrosion of Competitive Advantage."
The solution: Go upscale with some of your products, where margins are always higher. It's a strategy similar to what big car manufacturers have been doing in recent years: Big trucks don't cost too much more to make than sedans, but they cost a lot more on the sales lot. Customers are willing to pay a premium for that size and power. That's money the carmakers can pocket.It's the same thing in the PC market. More power, more features usually mean more profits for the manufacturer on each item sold. And Carr argues that, like car buyers, some consumers think of their PCs as statement items and are willing to
See more CNET content tagged:
margin, profit, Dell, Texas, Apple Computer
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 http://
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.
- Out of touch with reality...
- by Arthur Young October 5, 2005 12:15 AM PDT
- If you think PowerPC's and Mac's are so underpowered
- Like this Reply to this comment
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Showing 1 of 2 pages (40 Comments)check out the top500 supercomputing site http://
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.