Dell to cut back customizing of its PCs


#1

One of the things that makes Dell unique is their commitment to providing customers the ability to “build their own” PC.  It seems that Dell is moving away from their business model. :confused:

http://www.latimes.com/business/la-fi-dell3apr03,1,3890719.story?track=rss


#2

What a difference a decade makes.

1997:  Michael Dell on Apple’s fortunes: “I’d shut it down and give the money back to the shareholders.”

2008: Apple market cap: $134 Billion.  Dell market cap: $39 Billion. 

I think Dell is figuring out “The Paradox of Choice”:  Too many options makes customers unhappy.  It may be too late, though.  They really should simplify things.  Most people don’t have a clue what they’re looking for in a computer.  Laptop versus desktop, maybe screen size.  That’s about as far as the average person will go before getting hopelessly confused.


#3

Laptops? Desktops? help me I’m confused… hopelessly actually…


#4

I dunno.  I think the average user also understands hard drive space, dvd burner, and omg 30 days of Norton AntiVirus…how can I lose???


#5

You mean they are removing the 25 pages of options you can pick ? WOW, i love how apple has one simple page, add a monitor add more ram hdd space maybe a glossy / matted screen and estra apple care, then its check out and leave, none of this 25 pages of options then another of do you want more of this and that…


#6

Sorry to bust up the thread:

hackingthemainframe.com/migavatar/hair.swf

Freaky…


#7

Ironic indeed.  Apple has come a long way from the dark days.


#8

Original here:  cubo.cc/


#9

Heh-heh, that’s a creepy avatar, MiG. :smiley:


#10

I’m sure most of Apple’s earnings come from the iPod.


#11

LOL u on crack ?


#12

Well, the thread is really about how badly Dell is doing, not about Apple.

But…  Apple’s sales of computers grew 37% last year, versus PC manufacturers that grew by 3%.  It had its best computer sales quarter ever in Q3 2007, then beat record that in Q4 2007.  Apple’s selling more computers now than it ever has, and it’s been around for more than 30 years.

Sure, they’re selling iPods and iPhones like crazy too, but not at the expense of the Mac line.  In fact, most economists credit the iPod for creating a “halo effect” that has increased Mac sales dramatically in the last 10 years.

So yeah, if you’re “sure most of Apple’ earnings come from the iPod” then you’re wrong.  Revenue in Q4 '07 of computers was $3.1 billion.  iPods: $1.6 billion.  That’s revenue.  If you take into account the margin on Macs is higher than the margin on iPods (on average), then you’d be even more wrong.

But hey, nothing like being absolutely sure of a fact that you can just google, right?


#13

Exactly.  Thank you.  I wonder if Dell’s foray into Linux has generated any revenue to speak of?
Here’s some more stuff about Dell’s profitability.

[quote] It is tough to cut a break from Wall Street when you have been a darling so long, providing more sales, profits, and growth of both than other players in a market. Just ask IBM in the early 1990s, Sun Microsystems in the early 2000s, Hewlett-Packard a few years ago, and Dell right now.

Dell reported its fiscal fourth quarter and full fiscal 2008 financial results last week, and even though sales rose by 10 percent, to $15.9 billion, operating income in the quarter fell by 6 percent to $776 million and net income fell by 6 percent to $679 million. Ironically, Dell hit its long-time financial goal of breaking through the $60 billion barrier in fiscal 2008, with sales up 6 percent to $61.1 billion; net income rose by 14 percent for the year, to $2.95 billion. But the fact that sales in fiscal Q4 were lower than Wall Street consensus estimates and, more importantly, Dell’s top brass said that caution among consumers might make the next few quarters a bit bumpy.

In the quarter ended February 1, Dell posted $4.9 billion in desktop PC sales, up 2 percent, and mobile PC sales of $4.8 billion, up 24 percent. Server and networking gear sales grew by an unimpressive 2 percent to $1.6 billion, and storage sales were up an equally uninspiring 2 percent to $600 million. “Product transitions and conservatism in the U.S. commercial segments did adversely affect growth in those product categories,” explained Donald McCarty, Dell’s new chief financial officer, in a call with Wall Street analysts.

Dell did a little better in services, with sales up 7 percent to $1.4 billion; software and peripheral sales in the quarter rose by 15 percent to $2.7 billion. On a geographical basis, Dell’s sales in the Americas region rose by 8 percent to $9.5 billion, and sales in Europe rose by the same 8 percent to $4.2 billion. The Asia/Pacific region saved Dell’s quarter, with sales up 28 percent to $2.3 billion. Operating income in the Americas region was slammed by restructuring costs, which contributed to the earnings drop in the fourth fiscal quarter.

For the fiscal 2008 year, Dell’s desktop PC business was down 1 percent to $19.6 billion, while its mobile PC sales rose by 13 percent to $17.4 billion. Server and networking sales were up 12 percent, to $6.5 billion, and storage product sales rose by 8 percent to $2.4 billion. Services sales were weaker earlier on in fiscal 2008, and only rose by 5 percent to $5.3 billion during the 12 months; software and peripheral sales were up 10 percent to $9.9 billion.

Dell ended the fiscal year with $9.5 billion in cash and spent an astounding $4 billion buying back its own shares on the open market. Dell said it plans to spend at least $1 billion buying back its shares in the first quarter of fiscal 2009. (This stock purchasing cushions the blow on net earnings per share comparisons.) Dell has shed 3,200 jobs in the past eight months to help cut costs and obviously either needs to cut costs or grow sales to get profit growth tracking with sales growth again, much less outpacing it, consistently every quarter. For the year, Dell already did that in fiscal 2008. But Wall Street was a very long memory and remembers much larger double digit growth in years gone by. [/quote]

http://www.itjungle.com/tlb/tlb030408-story08.html


#14

The race to the bottom hasn’t really helped either Dell or HP, which are the only two PC manufacturers still stuck in that game. 

They have razor-thin margins (or even take a loss) to maintain market share.  It’s obsessive tunnel vision from suits who look at a market share pie chart and see that HP’s slice is slightly larger than Dell’s.  What they don’t realize is that market share is often irrelevant to the health and profitability of a company.  Recently, BMW has been more profitable than Ford, even though Ford’s share of the sales pie chart is orders of magnitude larger.  Or that Dell outsells Apple by a large margin, but Apple’s computer sales revenue still beats Dell, not to mention profit per unit.

Speaking of Ford, this was an interesting piece:

guardian.co.uk/technology/20 … a.business

It basically drew the analogy of PCs=Ford Model-T.  Sold like hotcakes, until the market matured and demanded something more than the “basic” model. 

Dell is like Ford of the Model-T generation.  It needs to differentiate itself from HP and Lenovo if it is going to survive.  Notice they didn’t absorb and assimilate Alienware outright?  That’s a good start.

Further reading about Dell’s failings:  tinyurl.com/ysmxmm also makes the Model-T comparison.

“Dell: Beware the Beige-Box Blahs.  The PC maker shouldn’t dismiss Apple’s design-driven success. Markets historically evolve past commoditization to value style and special features.”

[quote]It’s the classic Model T strategy. Like Dell with PCs, Ford Motor came to dominate the car market a century ago by turning the automobile into a cheap, mass-market product. Other manufacturers couldn’t compete with Ford’s extraordinarily efficient operations. By the early '20s, sales of Ford’s drab but well-built Model T surpassed those of all other U.S. auto makers combined.

Then the market changed. As consumers began to take cars’ basic functions for granted, they started seeking a little pizzazz in their vehicles. An unadorned black roadster was no longer enough – everyone suddenly wanted a stylish set of wheels. Niches proliferated. Fashion mattered.

“MASS CLASS.”  General Motors President Alfred P. Sloan saw the change coming. Popular consumer products, he understood, tend to evolve through three phases. They start out as luxury goods, expensive to produce and pitched to a small, elite market. Then, as maturing technologies and economies of scale drive down manufacturing costs, they become mass-market commodities.[/quote]


#15

Soon as Dell sent out flyers with those cheap P.O.S. models on the front cover, people started buying the P.O.S.

Barely any Dells thru the shop the last year were better models. Not one of them was worth mention. All the custom were id10t customizations ie: Celeron with a bigger hard drive. An extra Gig RAM… a graphic card barely worth purchasing.


#16