A sedate Dell posted fourth quarter results that didn’t horrify investors even though its PC and notebook sales fell in dramatic fashion. Dell reported USD 14.4bn in revenue – down from USD 15.2bn in the same period last year. The company’s net income came in at USD 673m, which marks quite the fall from last year’s haul of USD 1bn. Officials declined to face off against financial analysts and discuss the results in a conference call as is customary, primarily because Dell counts its fourth quarter results as ‘preliminary’ due to a pair of investigations into its past accounting.
Dell has screwed up on multiple fronts, for the consumers and and company, laptop market the battery fiasco has screamed “avoid Dell like the plague”. Yes its Sony’s fault to an extent, but consumers are fickle they blame the name on the box. And rumors won’t mention the name on the inside only the obvious name on the outside.
For companies, Dell dragged there feet on installing Linux on servers, last week’s press announcement was too little too late. On desktop they were stuck behind MS’s vista cycle, “I’m not buying a new box now when I have to have to send around my techs to reinstall the all the new boxes, that’s just a headache.” So a lot of there customers put their purchases on hold.
I also wonder how many Dell customers still associate them as an Intel only shop, or just shying away from Dell for AMD based solutions as too new as untested, will Dell’s implementation be buggy will the support be properly trained.
While Dell was putting out the fires, their competitors stepped up with powerful low cost solutions that provide a valued. Sun is waiting in the rings to take over 3rd spot in top x86 servers and there desktops are gaining steam. Sun also has something that Dell will never have. Sun is a one place stop for Desktops, Servers, Storage, Tape, and Operating system, so people that want to ease there support burden and passing the buck with there current solution has far too much of. They look at Sun and find the answer, it could cut the number of calls needed to solve a problem from 8 to 2 or even just 1. Even if you don’t choose Solaris, Sun has working relationships with all the main OSes and virtualization providers, Linux, Microsoft, VMware, Xen, and has engineers and programmers working actively together and the CTO’s and buyers know this.
Can Dell recover from there mis-steps and delays? I’m not sure but they are going to have to work quite hard to do so.
Good post.
Sun(as well as apple) have an advantage in one manner that they have their own operating systems.
I know I’m not the first to propose this, won’t be the last.
Dell should buy or roll their own linux. Then they wouldn’t have to worry about getting screams from the linux community about only supporting (x distro).
“here at dell, we only support our own operating system. And of course windows.”
Why go for Linux? if I was Dell I’d probably go for OpenSolaris or PC-BSD – but what Dell needs to do is invest money getting third party software vendors onside; no use pumping out a great piece of hardware with an awesome operating system ontop if there are no applications to run on it.
Its like designing the worlds best card, most awesome fuel efficiency, zero pollution and the likes – but uses a completely new fuel which no one supplies yet.
Sometimes its necessary for the ‘trend setter’ to do something about it – Dell has the cash, purchase out Mainsoft and Corel; port all of Corels software using Mainsoft to OpenSolaris; give away free copies of Mainsoft along with the free copies of the developer kit Sun is giving away; bundle Wordperfect Suite along with Corel Graphics Suite with the machine loaded with a tweaked version of OpenSolaris (DellOS if you will) and ship it for a reasonable price and voila, profit!
If Dell came out today, offered such a deal, I’d buy a laptop and desktop instantly, and bettter still, push it to any clients I come across on my travels.
Why go for Linux? if I was Dell I’d probably go for OpenSolaris…
Well, this might be one of the reasons why you’re not Dell. Dell and Sun are competitors. Sun is Dell’s primary competition in the workstation and server markets they so dearly want to infiltrate. Something tells me the solution isn’t “if you can’t beat ’em, join ’em”.
One advantage that Linux has in appealing to platform vendors is that there is no explicit association with any of the platform vendors. No one owns it, no one controls it. Each competing platform vendor can roll their own distribution and continue to differentiate themselves from the others based on the quality of the software and the associated services. Competition is built right into the platform, but so is sharing. It’s cooperative competition, the best of both worlds for the consumer.
This goes back to my usual point about OpenSolaris. It’s Sun’s platform. They just want outside help. It will never be our platform as long as Sun owns the copyright. But I digress…
Well, this might be one of the reasons why you’re not Dell. Dell and Sun are competitors. Sun is Dell’s primary competition in the workstation and server markets they so dearly want to infiltrate. Something tells me the solution isn’t “if you can’t beat ’em, join ’em”.
One advantage that Linux has in appealing to platform vendors is that there is no explicit association with any of the platform vendors. No one owns it, no one controls it. Each competing platform vendor can roll their own distribution and continue to differentiate themselves from the others based on the quality of the software and the associated services. Competition is built right into the platform, but so is sharing. It’s cooperative competition, the best of both worlds for the consumer.
This goes back to my usual point about OpenSolaris. It’s Sun’s platform. They just want outside help. It will never be our platform as long as Sun owns the copyright. But I digress…
And you know sweet cheeks that Dell can easily can create their own distribution, just like Linux! theere are already many OpenSolaris based distributions already! amazing! fabulous! and you know, Solaris can compile with GCC! no reliance on Sun development tools no longer!
Come out from the Eclipse (IBM/Red Hat/Novell club), the Sun is out, and with a bit of love and attention, OpenSolaris can be turned from drab into fab with a little cash.
So maybe you take some advice from that song: “don’t believe the hype, don’t don’t don’t believe the hype”.
Edited 2007-03-03 07:08
Please show me one full useable version of Open Solaris. Open Solaris and Solaris X86 lack drivers, the install process sucks. Changing things like IP addresses, DNS, host names etc sucks BIG time.
Simple things suck like installing DST patch for Solaris and having to reboot then HOPE the server comes back up without hanging. (Which happened to me on a Spark Solars 10 machine)
But on my Linux machines and also Windows (Windows even!) Installed DST patches, no reboot, nothing.
Solaris has some cool features but it has a LONG way to go to catch up to the useability eveen at the kernel level that Linux has.
It seems to me, that by now practically everyone has replicated Dells model with lean manufacturing and efficient distribution. That was really what Dell had in advantage. In my mind, the other major players have both superior service and R&D compared to Dell. Especially HP seems to be reinvigorated.
Should be interesting to see if Michael Dell is willing to experiment with the business model. Especially I will look forward to seeing, if they will develop retail presence, and how Dell will try to overcome its huge problems with attracting consumers with their conservative brand (and conservative products).
But most of all, I am happy not to be an employee at the company right now. Tough times ahead…..
Could be that the market as a whole was slow in 2006. Lots of people waiting for Vista to come out before they spend the money to upgrade perhaps? Maybe people just dont feel they need a new computer at the moment. Hard to say what the problem is without more facts.
Their downfall has been directly related to inadequate customer service. Just as people within a family will not hesitate to share a bad business experience the internet now links our experiences together and leaves nothing hidden. I think they have now reached the point where they have simply run out of uninformed people to sell shoddy service to.
*L*I*S*T*E*N* *T*O* *I*T*S* *C*U*S*T*O*M*E*R*S* and preinstall linux on a select group of laptops and desktops.
What a crazy concept, eh? Dell asks its customers what they want, they say linux, then Dell says no.
That’s just plain good business!
*sarcasm*
And no, I don’t expect that linux compliance will make up for a 1bn shortfall. But it can only help if that’s what the customers want!
Edited 2007-03-02 22:06
It’s even worse than a non-desired to support non-MS OSs. We just needed to buy 3 computers at time when Vista went out. Since we just needed cheap desktop computer for controlling GPIB devices we decided to buy brand computers. However, our institution is not yet accepting Vista computers until the IT department get some experience with the new OS (who can blame them of taking precautions?). Besides, I didn’t want Vista because the GPIB drivers, legacy software and etc. I just wanted XP. But alas, during the days just after the release of Vista, it was impossible to buy a new Dell computer with XP, the sales represantative told me by phone that it was totally impossible of selling new computers with XP. What the heck!!!!!??? I just clicked on HP web site and we ordered the same day three HP computers.
Days after, and until now, they changed their mind and you can buy again desktops PCs with XP for business or governmental agencies. Trying to force clients, specially business or public institutions, to adopt abruptly a new OS/technology is the worst practice ever.
Maybe the axe you have to grind lays with the software and hardware company who are too lazy to issue customers with an update for their software and hardware so that it can run flawlessly on Windows Vista – ever thought that 99% of the worlds IT problems sit squarely on the shoulders of lazy hardware and software vendors such as the company who produced GPID device?
Remember what the Dell CEO once said about Apple? Guess maybe he should refer to his own company!
“Shut it down and give the money back to the shareholders”
Forgive me for playing devil’s advocate here, but technically that did happen.
Apple Computer no longer exists.
And from the ashes rose Apple. Just Apple.
Yes, I know, the distinction…. it’s alot of splitting hairs. But Apple’s core business just isn’t computers anymore. It’s Ipods and music downloads.
Finally, the name reflects reality.
Based on what evidence? their computer shipments are growing at double digit rates, yes they’re selling more iPods but that is due to the cheap, disposable nature of them, they’re upgraded along more willingly than say a computer which costs around 3 times the amount.
So far from my tracking of Apple they have gone from shipping *only* 4million Macs per year to a situation where they’re going to get to 8million soon and continue growing.
I have to admit, I’ve always been a fan of the vertical model – it may not be the ‘cool’ thing for the wall street types who seem to have wet dreams over buzz words but it seems that if you look at the companies who focus on the customer and market their products to buggery rather than blathering on about so-called ‘new business models’ are the ones which succeed in the end.
Edited 2007-03-03 00:03
There are three lessons here.
One is the lesson of Dell, That is that if you execute badly in a given business model, in their case by failing to accept the logic of their position, your competitors will eventually start to gain market share at your expense.
The second is the lesson of the eighties and nineties. That was that for the computing industry, the vertical model in the sense of Apple circa 1990 is dead.
That vertical model was proprietary and incompatible everything. The bus, the graphics, the peripherals, the OS, the software. The obituary was finally published when Apple moved to Intel, but it had been dead since the 4400 when Macs first had PCI slots and IDE drives.
The third lesson is that market share plotted against profitability is not a straight line function. At the low end, if you stick around, you are probably in a niche with all that implies – you’re different, and in ways that matter to your customers. Whatever we think of Apple, this is clearly the case. It allows premium pricing and high margins.
At the high end you will also be profitable because of economies of scale.
Dell had fallen into a situation which one has seen in other areas – Marks and Spencer in the UK fell into this one too – where it is no different from anyone else, but also no bigger. If management in such a situation fails to accept the reality of their position and attempts to keep up margins over those of competitors by reducing costs or raising prices, the result will be inferior products and eventually falling share. But if they accept it, there is no reason why they should not run a company very successfully for both customers and shareholders for many years. This is basically how life is for most companies in mature industries. The returns are average but adequate, the products and support perfectly acceptable, and they always used to pay dividends.
But their managements have had to give up the fantasy of being high margin growth companies. Which is a painful process for them, and sometimes their customers too.
We will know that Dell and MS have fully reconciled themselves to the realities of life in a mature industry when they start paying dividends. Look forward to it.
As to Michael Dell’s famous advice, this is how to assess it. Find out how much a dollar invested in, say, the S&P, would be worth today. Then find out how much a dollar invested in Apple would be worth today. Then adjust for risk. The question is: what was the difference in risk adjusted rate of return. It would also be interesting to plot this over time: how long did the Apple investor have to wait from the time of his prescription, before risk adjusted returns were in Apple’s favor?
Its left as an exercise for the reader. The answer to the last question however is, a lot of years.
I agree with most of the comments above.
Dell screwed up on customer service, ability to listen to customer needs, price on the high end, and the server side. Basically they hit the ground and it can’t get worse. I believe that with michael back in charge, a lot of mea culpa they are about to bounce back. They still have plenty of cash and as they say, the bugs are out of the system..
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Were full with DELL monitors (and I guess machines). Usually the good guys (cops, etc.) would have the DELL monitor, and the BAD guy the Apple iBook. Well not always, but it was kind of trend to see in the movies from the last few years.