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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 augiem on 8/23/2012 2:23:58 AM , Rating: 4
Legacy is the whole reason Windows is a success. You can still run programs from 30 years ago if you so choose. If they did a total reboot, they'd probably lose 90% of their customers who'd have nothing to lose anymore switching to something else. No, legacy support is VERY important to Microsoft and its what they do. Until Windows 8, high customizability and easing users into changes was also the name of the game. Even up to Vista you could still use the old style start menu. Even after they changed the task bar to icons in 7, they let you go back to the text+icon based one. They've always had some consideration for those who liked doing things the same way in the previous version until Windows 8.

I don't mind so much that they took the start menu out. It's their attitude about it that really bothers me. As soon as a workaround was found to boot directly to the desktop by setting up a scheduled task on startup, they swooped in and blocked it. How does it harm them that a relatively few power users want to jump right to work? That attitude foretells the beginning of a new and more closed-box world for Microsoft users. Kind of reminds me of Luke, Han, Leia, and Chewy in the trash compactor on the death star. The walls are closing in.


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