It’s official: HP is the biggest PC-maker with Dell falling to the number two spot after the latest earnings reports from both companies. Dell has been hit with a stream of bad news recently, including unexciting profits, a costly battery recall, an SEC investigation, a volatile share price, and the death of its MP3 player. What happened? And where does the company go from here? Well, in a move that’s getting polarized reactions, Dell wants to reinvent itself with an initiative called Dell 2.0 (Is the name hip or an eye roller? You decide). Here are the details:
The new initiative will include getting into emerging markets, improving and simplifying the Dell website, revamping technical support, tightening the supply chain, and putting more emphasis on the services market.
As part of the initiative, Dell recently bought ACS, a British IT consulting firm widely known in London’s financial district. Apparently, Dell wants to move into designing and installing computer infrastructures rather than just focusing on basic PC support. It plans on making the move in typical Dell style: undercutting the competition with lower prices. As it is now, the services side of Dell brings in around 10% of total sales or $5 billion a year, though margins on services are much higher than margins on hardware. And its services division is growing by more than 20% a year compared to only 5% growth for hardware.
But there a couple factors that skeptics (with whom I happen to agree) are pointing out. Dell may be putting itself in competition with some of its best customers (i.e. service firms that recommend Dell hardware for their clients). And another concern is how to compete on price with the rise in inexpensive services coming out of India.
And this move comes after Dell already changed its advertising campaign and pledged a $100 million investment to better customer support including a new remote help system (see Dell New Ads: Trade In Speed & Price for “Personal” and Dell to Improve Support: $100 Million Investment + New Remote Help).
All these initiatives, announcements, plans, etc. may sound exciting… But is Dell spreading itself too thin? Where do you think the company really needs to focus to regain the number one spot?
Hi Bob,
Thanks for taking note of Dell 2.0 and sharing your perspective. We understand that results, not rhetoric, are needed to overcome skepticism such as yours.
The strategy to reinvigorate our business is in its early stages. We have a lot of work to do but we’re on it and we’re already seeing traction, from reduced on-hold times to the broadest product line in our history. That said, it may be helpful to understand that many of the the decisions being made today are for the long-term — as in no quick, superficial fixes — and we know that progress will not necessarily be linear.
Also, having a No. 1 share worldwide at any given time has its merits but there are other considerations — not the least of which are taking opportunities to improve margins. Such decisions benefit the company and ultimately all of its stakeholders.
Thanks for the opportunity to provide context.
John,
I appreciate your comments and agree with most everything you said, especially the fact that going for No. 1 may not be the best strategy. It’s the type of thing that would be best if it happened indirectly as a result of other initiatives.
Despite my skepticism, I am a fan of Dell hardware (my laptop I’m using right now is a Dell) primarily because of its superior prices and customization options. And boosting customer support via the $100 million investment was a great move. I haven’t had to use Dell support since that announcement, but I hope the initiative includes cleaning up the phone system (in the past, I would get frustrated with having to go through five menus before getting rerouted to somewhere I had already been before ever talking to a human who then had to transfer me anyway, etc.).
But the other strategies being characterized as long-term and nonlinear will be the most interesting to follow, especially from an investment / shareholders standpoint.