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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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RE: Where was Dell...
By tayb on 8/22/2012 4:29:55 PM , Rating: 1
Where was Dell when the iPad hit? Same place pretty much everyone was. You could say the same thing about Samsung, Motorola, et al when the iPhone hit. They had nothing. They could not compete with a thin form factor device that was $499 and could run for 10 hours. Samsung, Motorola, et al were thrown a bone by Google which allowed them to not watch Apple run away with the smartphone market. Google threw Dell a bone with Android but so far the Android tablet market has been less than stellar, despite excellent tablet offerings.

Relying on Windows 8 indicates a sad state of affairs for Dell. We've known for well over a year that Windows 8 would run on ARM. If Dell had a hit Android tablet they could suddenly have a Windows 8 tablet with little re-engineering. Where is their hit Android tablet? Where is their Windows 8 Pro tablet? WTF are they expecting Windows 8 to do for them?

RE: Where was Dell...
By Tony Swash on 8/23/12, Rating: -1
RE: Where was Dell...
By Helbore on 8/23/2012 10:54:14 AM , Rating: 2
The PC market is dying, yet you also think Apple will thrive with laptop and desktop sales.

Its like you live in a world where Apple defies logic. They can simultaneously kill a market AND also thrive in the same market their killing off.

Reading your posts, I sometime wonder how you manage to make it through the day without getting killed. I'm guessing you don't apply the same crazy logic to mundane, non-Apple things. Compartmentalization, I think they call it.

RE: Where was Dell...
By Tony Swash on 8/23/12, Rating: -1
RE: Where was Dell...
By Helbore on 8/23/2012 4:10:30 PM , Rating: 2
The writing is on the wall.

People were saying that about Apple 15 years ago. You should know better than to make such large assumptions about the tech industry. A couple of years ago you would have laughed if anyone had said that Android would steal the lead in the smartphone market from Apple.

The truth is you are one of those people who suffer from confirmation bias. You are so desperate to believe that Apple will conquer all, you rabidly latch on to any statistic that even vaguely supports your view and then completely ignore anything that might suggest otherwise.

I don't know of a singe reputable analyst that thinks Apple is about to cannibalize the Windows market. Its only people like you who think that Apple will continue to double their profits every quarter from now until the end of time.

RE: Where was Dell...
By Tony Swash on 8/23/2012 5:57:13 PM , Rating: 1

I don't know of a singe reputable analyst that thinks Apple is about to cannibalize the Windows market.

Apparently the Windows OEMs thinks the iPad is eating their business - but what the fuck do they know?

RE: Where was Dell...
By Helbore on 8/23/2012 7:11:07 PM , Rating: 2
Do you honestly think that means that all the PCs in all the businesses across the world are going to get replaced with iPads?

Do you honestly understand the markets you are talking about?

Like I said; confirmation bias. You don't even try and understand the bigger picture, because you're not interested.

RE: Where was Dell...
By Tony Swash on 8/24/12, Rating: 0
RE: Where was Dell...
By 91TTZ on 8/23/2012 3:29:04 PM , Rating: 2
It sounds like you're confused. The PC market isn't dying, it's just a mature market that isn't growing as fast as the newer mobile market. Companies are going for the money.

PCs will always be around because the form factor fits the function. You can comfortably sit at a desk, rest your arms on the desk and look at a large, high resolution monitor. It's sort of like how cars have had the same basic shape for the last 100 years, and how carriages had a similar seating arrangement before that. That particular form fits the function. There will be slight changes in the details as processors get faster and monitors get bigger, but the basic form is here to stay.

"The Space Elevator will be built about 50 years after everyone stops laughing" -- Sir Arthur C. Clarke

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