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Tablets are only part of the problem for Dell

While Michael Dell's offspring have drawn the ire of the executive's $2.7M USD family security detail, thanks to some indiscrete postings picked up by "Rich Kids of Instagram", Mr. Dell himself has face equally embarrassing numbers from his struggling firm's financials and sales.  

I. Dell Faces Tough Questions, Says Windows 8 is the Answer to Everything

Dell, who says it's "no longer a PC company" is surely performing like a company who's out of touch with consumer PC sales.

In Q2 2012, Dell, Inc. (DELL) fell into roughly a tie for third place with Taiwan's Acer, Inc. (TPE:2353) after fast-growing Lenovo Group, Ltd. (HKG:0992) booted it from its perennial second-place spot behind Hewlett Packard Comp. (HPQ).  That sales fall resulted in a 22 percent plunge in consumer sales revenue and 8 percent overall revenue drop, despite a good quarter for the enterprise unit.

Michael Dell
Michael Dell's company has stumbled into a tie for third place. [Image Source: Forbes]

But CFO and senior VP Brian Gladden is convinced Microsoft Corp.'s (MSFT) Windows 8 will bail out his chief's struggling firm.  He commented to investors in a call:

You'll see new Windows 8 ultrabooks, all-in-one tablets and converged devices in the fourth quarter and headed into next year.

It's not clear what Dell means by "all-in-one" or "converged devices", but he was probably talking to hybrid tablets -- tablets with a keyboard (which may or may not be removable).  Also unclear is exactly how Dell plans to differentiate itself from its rivals; Lenovo, HP, and Acer are most definitely pushing Windows 8 product too.

Dell tablet
Dell thinks Windows 8 will be sweet salvation. [Image Source: Storage Look]

II. Editorial Blasts Dell as "Done"

In an editorial carried by ReutersSlate magazine staffer Farhad Manjoo writes "Stick a fork in it: Dell is done."

The opinion columnist comments that Dell is suffering an "existential threat", continuing:

However ugly your life gets, just try to put yourself in Michael Dell’s shoes. Imagine what that’s like. Picture yourself at the helm of a company that rakes in $60 billion in annual revenue — and then watch the money evaporating, floating away on a post-PC cloud. You built this company on the theory that computers were a forever-business, that the world would never fall out of love with the PC, and that you would be the guy to supply their fix.

The tragedy is that you were right: The world will never fall out of love with the PC. The PC is still riding high, the PC will be bigger than ever. What blindsided you is how the word “personal computer” would come to be redefined.

The overall premise of the column is that the rise of the tablet is killing Dell.  Mr. Manjoo mocks Dell's sales chief's nebulous remarks on his company's tablet timeline from earlier this year, in which he stated, "We have a roadmap for tablets that we haven’t announced yet."

While the criticism may be fair, it's equally important not to neglect that Dell is also failing in traditional PC sales -- a topic Mr. Manjoo surprisingly overlooks.

Dell Streak
Tablets, like the ill-fated Dell Streak, are only part of the problem for Dell. [Image Source: Engadget]

Looking at Gartner, Inc.'s (ITreport and the IDC Group report for Q2, one company that jumps out is ASUSTek Computer, Inc. (TPE:2357) who stole the crown for fastest growth from Lenovo (who continues to grow pretty fast itself).  ASUSTek -- which has a stable of drool-worthy Windows 8 laptops, tablets, and hybrids waiting in the wings -- grew at a 40 percent clip on a year-to-year basis.  A few more quarters like that -- and a few more quarters like Dell's -- and the U.S. PC giant may find itself in fifth place in global sales.

That would be a stunning fall for Dell, which vied for the top spot in global sales for so long.

It's clear tablets are only the start of Dell's problem.  From shady sales tactics to a floundering web presence, the problems at Dell are numerous across the board.  Dell may look to Windows 8 for salvation, but its failure to execute with current generation designs, inspires little faith that it will be able to execute in the next generation Windows era.

Sources: Seeking Alpha, Dell, Reuters

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Dell's actual problem
By kleinma on 8/22/2012 3:51:31 PM , Rating: 3
Dell's actual problem is due to cost cutting.

They sell crap hardware, loaded with crap bloatware, with tech support in crap india, and are pushers of crap extended warranties, mostly because they know their crap will die way sooner than it should.

No one ever calls dell tech support and feels like they got good service afterwards. Even if the problem gets solved (which is rare) it is only after a nightmare with some guy named Bob who doesn't speak english and is spewing unintelligible english from a script.

I will always build my own desktops as long as I can, but outside that I will be going all microsoft hardware for portable stuff. Surface Pro and WinPhone 8 will do nicely.

RE: Dell's actual problem
By retrospooty on 8/22/2012 4:07:45 PM , Rating: 3
To be fair, on the enterprise side, Dell's equipment is very reliable, and the tech support is top notch as well. On the consumer side, you are absolutely right, complete loserville in all aspects.

RE: Dell's actual problem
By Master Kenobi on 8/22/2012 5:25:37 PM , Rating: 2
There is a theory that Dell's enterprise segment is less a division of Dell and more of an independent subsidiary that uses the Dell supply chain.

RE: Dell's actual problem
By retrospooty on 8/22/2012 5:36:00 PM , Rating: 2
LOL... possibly. In other words, it works because it doesn't have Dell's cheap fingerprints all over it.

RE: Dell's actual problem
By Senju on 8/23/2012 1:31:13 AM , Rating: 3
You are absolutely correct. I was totally amazed how fast the turn around to get a tech guy visit a client office to replace a damaged dell machine. I was then shocked to find out Dell is using 2 or 3 outsourcing companies to dispatch engineers and it is only DELL telephone support center which is *really* Dell. Anyway, the support is great but I am afraid I cannot give that praise to Dell.

RE: Dell's actual problem
By retrospooty on 8/23/2012 10:36:12 AM , Rating: 2
Ya, I dont know how they make money with that. Most enterprise customers would be fine with sending to a repair depot, fexed etc like Lenovo. Sending a tech to your site has got to cost them and arm and a leg. Oh well, not my issue =)

RE: Dell's actual problem
By nedsand on 8/23/2012 3:25:08 PM , Rating: 2
Lenovo does it the same way Dell does for large customers. Only they are not nearly as efficient. The last place I worked for did contract work for Lenovo at an office with about 700 users. When the guy who was doing the work moved on I was asked to fill in until we could hire a replacement.

I had a laptop with a bad button cell cmos battery. There were three different part numbers for it so I just picked one. Turns out the different part numbers designated what facility the part would be shipped from. I picked the wrong one for the US and they rush shipped a single button cell battery in a box measuring 2.5'x1'x1' from the Philippines to Kansas. The box had 6 large stickers on it warning of the explosive nature of Lithium/ion. They were also constantly back-ordered on warranty replacement parts for very common up to date desktops/laptops.

The place I work at now uses Dell. I always have the trouble shooting done before I contact them. And I always contact them with online chat support so I never have a language barrier issue. They even let me install the parts. This saves me time as I don't have to babysit a tech when they come out. Top notch service if you ask me.

RE: Dell's actual problem
By Taft12 on 8/23/2012 9:04:53 PM , Rating: 2
Most enterprise customers would be fine with sending to a repair depot

Wait, what? If your business is sending laptops or desktops with all that juicy data on it outside the office, someone should be getting fired!

RE: Dell's actual problem
By JediJeb on 8/22/2012 5:52:33 PM , Rating: 2
Dell needs to take a lesson from Samsung. I just bought a Samsung laptop and the only thing it had on it besides W7 was Norton's suit, a program to run the build in webcam and it's own control software that enabled the special settings and buttons on the keyboard. Also the Norton's was not actually installed, but did pop up a nag screen asking you to install it, which once I did a remove program on was gone forever. None of the crapware I have seen on Dell and HP products in the past. It was actually a very refreshing experience.

RE: Dell's actual problem
By The Saxophonist on 8/24/2012 1:57:10 PM , Rating: 2
Yeah, I have had several Dell desktops. They were all crappy. Within months, the cooling fans would break, hard drives failed, on and on. And they choke you to death with bloat ware. At least HP builds a quality product, albeit full of bloat ware as well. Dell needs to step up their game.

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