I find the fall of Dell a pretty fascinating story. In part because Dell killed Compaq and a bunch of other PC 'clone' companies with a build-to-order / operational efficiency model.
Apple, a company that Dell never saw as a rival, was 'doomed' with its bespoke computer design according to the best and brightest at Dell.
But what really put a crimp in Dell has been their dependence on Microsoft and Intel. Being constrained in responding to changes in the world (like the rise of non-Windows OS-X) by what Microsoft did, and early constraints by Intel that prevented them from capturing some server market with AMD chips, when Dell hit tapped out their ability to wring more value out of the supply chain, they lost their growth engine. And then they looked at adjacent markets, but with a clock ticking.
Trying to go too far afield into storage, briefly pumping up the music with 'boutique' computers, then committing a cardinal sin of using their customers against themselves by creating a 'lock in' strategy with Dell custom parts (motherboards, power supplies, and chassis).
So what keeps a company, when winds shift, from being nimble enough to shift with them? I wish sometimes I could go listen to the discussion that happened during the Opteron event, the Vista event, the first signs of OSX in the enterprise, the Canonical/Linux discussion. That story probably won't come out, and its too bad, I would love to read it.
"So what keeps a company, when winds shift, from being nimble enough to shift with them?"
Answering to Wall Street. Going private would give Dell tremendous flexibility without the risk of shareholder activism in the form of class action lawsuits. It offers opportunities to pursue long term strategies without worrying about quarterly dividends and pundits' predictions.
If Dell can go private, it is a sign that someone sees a long term upside or profit from liquidation. The former seems far more likely than the latter.
So bogus. There would be no lawsuit, at least no sane one, if a vision was clearly communicated. As for going private, what does Dell now have that puts them in any position for long term upside? If they go private the company will be chopped up. Given all the acquisitions that's for the best.
Good post. My frustration with Dell is that they never seem to launch any consumer products with confidence and stick with them. It's always timid and half-baked, and there's no rhyme or reason to their line of products.
There have been things like the Adamo laptop, Zino mini-pc, Streak tablet, various different XPS sizes, but they inevitably get cannibalised and confused by Dell's other products, and will be discontinued completely within 18 months.
Right now they have this slightly flimsy looking tablet-notebook hybrid: http://i.crn.com/products/xps_duo12_370.jpg and I'm sure it'll be gone in a year or two without any clear successor, and they'll lose any customers who liked the product and bought into the idea.
I've observed similar behavior in companies that are losing ground and trying to find a 'hit' to pin the company on. A series of initiatives that run for a while and then get pulled. This is especially true for a company that is too afraid to invest in building a new market that may or may not develop, so their 'me too' products come out fairly close to the existing market leaders with a small amount of differentiation.
Very true. For another example of their half-hearted strategy, see the release of the Venue Pro, a device for Windows Phone 7 with a form factor really standing apart[1]. It got good press, shipped in few countries with confusing release dates and (from what I've seen) barely any marketing, and was eventually canned fourteen months later.
Dell was too focused on being dependent on Windows volume to focus on quality design and build. It's kind of a sad story, and Michael Dell seems to have been AWOL the last 8 or so years. I just don't know what private equity can do other than put the cost and build the profits of the revitalization squarely on the shoulders of employees.
Every hardware manufacturer except Apple that didn't go with Windows got crushed. And Apple very nearly went bankrupt too.
Even after Apple's comeback they have an almost negligible presence in enterprise, which is Dell's main market.
I think that Dell would be well served to try harder at building Linux machines, but to say that going with Windows/Intel had anything to do with their problems is way off the mark - it was all the other things they got wrong.
Microsoft forbade manufacturers with 'favored partner' status from shipping Linux. This was the source of a fairly huge blow up between Asus and Microsoft when they shipped their first netbooks with a Linux OS. Microsoft went ape shit, and threatened to cut them off. Asus countered, successfully, that Microsoft didn't have an operating system for sale that could run on the netbook. As a result that lead to the strangest thing I've seen in a while which was Microsoft, bringing an OS they had both end-of-lifed and dropped support for everything except security patches, XP, re-releasing it as a 'supported' OS. Once they did Asus was compelled to switch to it over Linux on the eeePC line or face paying list price for OS installs on their hardware.
As part of the AMD/Intel anti-trust trial it came out that Intel was threatening companies like Dell with a similar strategy if they shipped an AMD Opteron product. Intel would cut off all 'soft marketing' dollars which meant a whole ton of exposure going missing for these companies, and revoking early access to next generation silicon.
Between that rock and that hard place, Dell was hard pressed to do anything more creative than ship Wintel boxes for as little cost as possible.
It's even the simple things, like build quality. A job recently required I use one of their new dell latitude enterprise laptops and I don't think I've had the privilege of using a more shoddily constructed computer. It looked cheap and the case felt like they cut a lot of corners; it just felt shoddy. It turned me off from buying from them when I needed to buy a new personal laptop recently. They're losing the reputation as a manufacturer of quality computing equipment.
Weird. I just got a Dell XPS 15 and I've been impressed with the build quality. The chassis feels comparable to a macbook and I actually like the keyboard on the dell better. Of course, this thing weighs a ton, which doesn't bother me at all. I'm wondering if other models are suffering due to an arms race between manufacturers to create ultra light weight equipment?
The problem is that some Dell's are great, and some are shoddy. But unless you do lots of research you don't know which is which. Part of the success of the Mac is that consumers (particularly time poor, non-techie consumers) can just buy one without worrying that they chose a bad model.
Exactly. I've always bought inspirons from Dell; faced some software issues, but the hardware is solid, runs for years without any hiccups.
I've noticed that they also seem to have better power management (don't heat up like crazy) and are much quieter than other wintels.
Procurement people in enterprises don't care about build quality... They want to shave as many pennies as possible.
Where I work, the people in the field are refusing new laptops because they get some awful 1366x900 screen that makes it hard to work. They would rather have an ipad with VDI.
From a more anecdotal and hand wavy point of view I it was also a marketing failure. Don't remember anyone thinking "Dell is cool, I really gotta have a dell PC or laptop". The people I know that got Dell was either because it was the cheapest or because their employee or university got a deal on Dell. Maybe I am just hanging out with the snobby Apple people and freedom loving Ubuntu people.
Building custom machines is cool but do most people know what custom components they want. Does my grandma know how much ram she needs?
Then also there is the whole shrinkage of the desktop market. I feel not many people are rushing out to buy desktops. So if that was significant part of their business, there is less of that.
More specifically I think dell had real branding issues. I mean what separates Alienware from XPS exactly? They sold cheap sub 400$ PC's and fairly high quality machines at the same time, but it was far from obvious if you would get say a decent case / power supply. And don't forget laptops, some clear and easy to find weight and battery life numbers would be nice.
Add to that a terrible website and a host of other issues and it's clear why they stagnated.
I agree about the website. They stuff customers into "Home and Office", "Medium Business", and "Enterprise" silos and it's very hard to compare products across those arbitrary boundaries. However, I do like how you can type in a service tag number and get information on just what was in that system when it shipped. If you can decode their highly obscure component names, that is....
I agree. And even within product categories, their website is an atrocious affront to sales sensibility. Their standard way of displaying 2-4 different products in a column, with the top line being the price, and no indication of any product differences until way down towards the bottom, below worthless "Deal" advertisements, is a terrible way to communicate with potential customers.
Whoever is in charge of the website should take a week off to familiarizing themselves with information presentation. Even reading a single Tufte book could have great results.
If I was taking Dell private, I would avoid the branding problem by dumping most of the consumer line. It's low margin, low services, and high marketing cost. The money is in B2B and that is where Dell is a market leader.
Building custom machines is hardly necessary for the "average" consumer anymore. In Dell's heyday, you could allocate your money toward the components that most-impacted your day-to-day usage. Want a bigger monitor? How about a faster processor? Don't store many pictures? No worry, no need to pay for what you won't use.
Now, for $500 the average consumer can get a computer that meets the vast majority of their needs.
Apple was doomed as a computer company. They survived only when their visionary founder came back to turn the company into a consumer electronics company. Without the successes of the iPod and iPhone product lines, they'd be dead in the water right now.
I would agree that they wouldn't have had the level of success they now enjoy if they had remained only a computer company - but way before the iPod was introduced in late 2001, don't forget that Jobs had already turned the product line around with the hugely successful candy colored iMac, the transition to OSX, and a return to quality and vision within the traditional computer market. With Jobs at the helm, I think that Apple would have been going places selling rice cookers. To write Apple off as "doomed" in that market seems naive.
Dell used to represent quality. IMO, Dell lost when they started playing the "race to the bottom" game and making unreliable computers to keep prices low. Differentiating your product solely on price is a losing proposition because there will always be someone cheaper. When the market shifted to Apple laptops, consumers had lost all confidence that Dell could make a suitable alternative. Consumers had no confidence that Dell could build an iPod or iPhone alternative. As a result, in the consumer market, Dell and HP were left competing for low margin scraps while Apple raked in all the profits from their high margin products.
The problem with Dell is that they were a great manufacturing company that decided to stop making stuff and turn into a mini IBM.
In reality, Apple in the computer space is just like Dell circa 1998. They have a small number of models, tiny supply chain and combination of BTO and well thought out base models.
Apple has its own challenges... They need to preserve margin while the price of mobile devices collapses to near zero -- a circumstance that is great for cloud services companies like Google, but not so much for folks selling hardware.
the only additional model from Dell in the xps is the xps 12 convertable (macbook air 11 inch?).
Dell just has cheaper product lines available... unfortunately the marketing clouds things -- to me, it looks they don't want the cheap models to sound bad, so they end up not being able to promote the high end models as "premium" as they should be.
Dell has easily 200 computer SKUs, and a 150+ page pricelist.
It matters because Apple, even though they have relatively small market share, has incredible economies of scale. Dell needs a bigger supply chain, more inventory, more people and other overheads to build, market and service all of these different devices. Profitability and quality suffer.
Also, because Apple buys in such quantities, they get to beat up suppliers and get more commitments from them. So while Dell's outsourcing partner needs to figure out how to substitute Motherboard Y for Motherboard X when vendor X can't meet delivery deadlines, Apple's partners just keep stamping out more.
I don't think the web interfaces are the biggest difference between the two. If Dell was selling the same quality hardware as Apple without the thousand different models and home/business price segmentation BS, I could put up with their website as is.
Edit: ugh, it is pretty bad though, I think it's actually worse than I remember. I suspect it's just a symptom of a fundamental problem though - as the late Steve Jobs might have said, they simply have no taste.
I suppose they just followed another strategy for selling, which I personally don't like. It's just a shame because with the build to order thing, they would have been halfway there.
Nope. At least Lenovo (via the front door of lenovo.com) and HP (if you know where to look) permit this, as of the last time I priced out a laptop anyway.
There are also smaller shops that will do highly customized builds (and often have web configurators since they're "cheap" these days), but I suspect you didn't intend to include them regardless.
... committing a cardinal sin of using their customers against themselves by creating a 'lock in' strategy with Dell custom parts (motherboards, power supplies, and chassis)
Were they really looking for a lock-in? I thought the Dell custom parts were mostly part of the "operational efficiency" model. Sort of like how Google has their own custom boards now.
Well 'lock-in' sounds like they had a plan, gratuitously changing the position of four pins in the power connector for no reason sounds 'stupid' and I don't think Dell is stupid.
Like Google, they played around with form factors, and they also did weird things like made the back panel look like a video card was plugged in when the board really just pulled up a connector from the mother board. Something that was arguably 'started' by people using the PCI chassis barrier strip as a holder for the 'extra' serial port or a parallel port, but Dell carried it further than anyone else that I know of.
Dell has never impressed me as a 'design' company, but making things cost effectively was their motto. And being able to customize just before shipment.
Depends on what that means. If you base it on their high of ~700, yeah, their current price ~500 looks pretty bad. However, they started out 2012 ~400. 20% gain in a year is pretty rock solid.
Market cap today is is still $472,000,000,000. Cash reserves around $124,000,000,000. Earnings of $8,200,000,000 on $36,000,000,000 in revenue last quarter alone. I think they're doing fine! :)
Apple has an incredibly long and prominent history of having its stock manipulated by traders around the timing of new product events and quarterly earnings statements.
When "today" is near one of those events, you probably don't want to anchor your evaluations of the company to a short-window snapshot of stock performance.
Worked when IBM spun-off its typewriter and dot matrix printer business and the PE turned it into Lexmark; or the recent Leica turnaround (which is going pretty well given the current economic climate).
Home PC sales were a strong part of Dell's income. Smartphones and tablets (specifically the iPad) have killed the home PC market across the board. Dell still has a strong server market and a strong B2B PC market (strong loyalty) through Dell Premier, but the home PC market is irreversible dead.
I used to work for Dell and was part of their dev team when e-commerce was the next big thing and sky-rocketed late 90's. I have always recommended Dell PCs to friends and family. I write this on a Dell Precision T5500, which was a beast (and still is) when I bought it 3 years ago. The build quality on their top of the range products is excellent.
However, if my parents came to me today with a recommendation for a new PC, I'd tell them to buy an iPad. They read (and rarely answer) their email, play the odd game of Mahjong, and use Skype to keep in contact with their children and grandchildren. They truly have no need for a PC anymore.
I can't count the number of times I have had to RDP into their virus ridden, broken Windows installation, because they clicked on something they shouldn't have and installed spyware or viruses.
We shouldn't forget that the "tablet market" used to be a joke. People what chortle loudly about "stupid tablet devices" and how nobody would ever buy one. Every tablet that came on the market was an abject failure. Then Apple came along with the iPad. Everyone thought it was bound to be another tablet dud. Everyone was wrong and Dell and Microsoft got caught with their pants down - one fellating the other. Dell still haven't really got off their knees to recover, but at least they can close their mouth now.
The iPad is a genius piece of kit. You really would struggle to break it. Even my parents couldn't get PC style spyware on it if they tried. It is that problem that Dell needs to crack. Microsoft have exactly the same issue and both companies know it.
Children these days have no need of a PC either, because they have smartphones. They keep in contact using Facebook chat or Whatsapp. When asked about email the other day, a teenager we know replied "oh, our generation don't use email. That's for oldies and besides you have to wait too long".
All of this is available to them via their phones - every second of the day. They are always online and always in contact with their friends. Having a PC means a fixed and non-movable connection to the internet, and they have to share it with their parents and siblings. This includes monitoring by parents, which with smartphones, is harder to do for most non-tech savvy parents.
Dell cut 75% of their product line and focus on a product that is better than the iPad. Microsoft bought Nokia for their mobile "experience". They should also consider Dell for their hardware experience. Their build-to-order process and technology is second to none, let's not forget that.
Apple, a company that Dell never saw as a rival, was 'doomed' with its bespoke computer design according to the best and brightest at Dell.
But what really put a crimp in Dell has been their dependence on Microsoft and Intel. Being constrained in responding to changes in the world (like the rise of non-Windows OS-X) by what Microsoft did, and early constraints by Intel that prevented them from capturing some server market with AMD chips, when Dell hit tapped out their ability to wring more value out of the supply chain, they lost their growth engine. And then they looked at adjacent markets, but with a clock ticking.
Trying to go too far afield into storage, briefly pumping up the music with 'boutique' computers, then committing a cardinal sin of using their customers against themselves by creating a 'lock in' strategy with Dell custom parts (motherboards, power supplies, and chassis).
So what keeps a company, when winds shift, from being nimble enough to shift with them? I wish sometimes I could go listen to the discussion that happened during the Opteron event, the Vista event, the first signs of OSX in the enterprise, the Canonical/Linux discussion. That story probably won't come out, and its too bad, I would love to read it.