Business week: It's Bad to Worse at Dell:
... "SNOWBALL" EFFECT? "At that size, it's difficult for any organization to grow at high rates, so now you see the top-line growth rate coming down," says Jason Maxwell, portfolio manager at Los Angeles-based TCW Group, which owns about 29 million Dell shares. "Does today's news worry us? No, but we were already closely monitoring whether Dell has reached the point where it's too hard to outgrow the market.... Our No. 1 concern is: Are they getting close to being so large so as to make the hurdles to outperform the market too high?"
Many observers, including customers, partners, and analysts, fret that Dell has been cutting costs so much in order to hit financial targets in recent quarters that it has compromised other measures of performance, including customer support and, possibly, product quality. "The key is to keep customers happy in an efficient fashion," says Maxwell. "Not getting the processes right can really snowball through the system quickly." ...
Dell "is too much of a one-trick pony," says a former high-ranking Dell executive. "They're not innovating or building enough new businesses. They've executed flawlessly for 10 years, but that's kind of an impossible thing to continue." Many customers have complained that Dell's once-acceptable customer service has slipped. ...
Dell's woes don't end there. It has suffered from executive defections in recent months, including the departure of its chief information officer. Just last week, Michael George, the vice-president and general manager of Dell's US consumer business and a key executive overseeing a planned overhaul of Dell's technical support operation, left the company to head up QVC.
Some rivals also think Dell will face increasing challenges in the corporate market. With Internet traffic booming, many customers are looking for more powerful servers to handle the traffice, in particular "blade" servers, or high-end servers on a motherboard that can be set side-by-side into a console to help save space. While Dell is attempting to build up its blade server business, both IBM (IBM) and HP are already well-established in that market and are enjoying brisk demand for their blade servers.
WANTED: NEW HORIZONS. Another problem: Dell is the only major server maker that isn't selling systems based on Advanced Micro Devices' (AMD) Opteron chip, which is rapidly winning over a higher share of corporate customers. "Dell is stuck with only Intel (INTC), and Intel is just not competitive right now," says Sun Microsystems (SUNW) Chief Technology Officer Greg Popodopolous. ...
businessweek.com
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