Dell is doomed, doomed I say!
Or not.
By Charlie Demerjian: Tuesday 06 February 2007, 14:21
IT SEEMS TO BE open season on Dell right now for all the wrong reasons. Picking on a company just because they are down seems to be the height of lazy journalism, and on top of that, is about as wrong a predictor of the future as you can get.
The problem is the same one that Sun had two years ago, a lot of big problems that were just becoming apparent to the casual observer. Jumping aboard the 'shiny thing' train, it was all doom and gloom for Sun, Sparc was dying fast, and the only hope offered was x86 boxes and software. They couldn't do well in commodity hardware much less software, could they?
Sun execs would stand up and say they knew there were problems, they had solutions, and in a little bit of time, you would see the results. Most people laughed them off and continued the doom and gloom scenarios because it was easy and low risk. They were wrong, but who remembers those pundits now?
Back to Dell, they are up to their ears in one form of excrement or other about now. They are not the cheapest anymore, they have a reputation for service akin to running a cheese grater over one's genitals, and enough corporate governance problems to choke a horse. Then there are the lawsuits from both private parties and potentially governmental TLAs.
Here is the funny thing, I think they are very near or at the bottom of their fall. In cases where a company screws up badly, they usually don't hit the ground with a colossal thud and climb out of the hole Wile E. Coyote style. Instead they tend to hit, bounce, skid a bit, bounce a few more times and leave a colossal mess in their wake.
Then comes the hangers on, profiteers and lowest of all, the self-aggrandizing crusading stock barons. Very quickly the whole thing turns into a circus and is completely divorced from reality. This is where Dell is now, they can't do anything without it being read as a sign of impending doom. Change is bad now, regardless of whether or not it is the correct thing to do. Like I said, it is a mess.
This isn't to say Dell didn't screw up, boy did they. It all started with some moron deciding that service and customer support was a cost not a way to please customers. You have their cash, they can only cost you money now. That was mistake one, and I can personally attest that it was why I stopped buying Dell. The net is littered with like minded people, and for the longest time the official response seemed to be to squelch any vocal dissent.
Two or three years later when the next buying cycle comes up, well, guess what, people don't buy from a company that screws them. Home users vividly remember talking to someone with a Bangalore lilt who swears that his name is Fred, he is stationed in New Jersey, and that it is your fault that the computer broke. Corporate users don't like that treatment any more than Joe Average.
Dell backpedaled on the corporate side pretty quickly, and home/SMB support is improving rapidly also. Someone noticed, but again, there is a lag, fool me once and you won't realize the problems for three years.
On the corporate side of things, there is a monumental mess. Dell pissed off Intel and wrote off the mother of all kickback schemes. By some accounts this was a 10 digit mistake that spawned at least one lawsuit. Dell took the hit, is getting beat up in the press, and can't open their mouths without looking stupid for a while.
To make matters look worse, they also just threw their CEO out, a move widely interpreted as flailing about with a grim reaper looking over their shoulder. How can this be good? How about Dell realizing they have a problem and acting to fix it? If you look at the glass being half full, this is the first step on the road to recovery, not the first foot in the grave.
Add in several high profile oopsies like the exploding laptops and the attendant battery recall, and their image suffered. Their defection to AMD didn't help mine either. All of these and other gaffes hurt Dell even if like the exploding batteries, they were not Dell's fault and were handled well. Compare and contrast how well Dell handled the battery recall with how badly Apple did, but Apple ended up smelling like a sociopathic rose in a black turtleneck.
Then they lost sales lead to HP, and according to some, that was the end of the company, put a fork in them, they are done. There is absolutely no way they can come back, and headlines about death get a lot of hits. Silly writers, no cookie.
From my vantage point, Dell is in the midst of fixing things. They have shown they are aware of problems, sometime far to late to prevent a negative effect but not too late to recover from it. They have shown they will sack people right to the top in order to institute changes, again not in time to prevent many problems, but in enough time to prevent disaster. What it looks like is that management is more than aware of the situation on the ground and can take steps to act on it.
Why do things keep getting worse? There is a time lag between identifying a problem and instituting a fix, turning a Fortune 500 company around is not an easy thing to do. Then there is another lag from the fix going online to it having an effect, good or bad. Sometimes these steps can take years, especially with a 2-4 year PC replacement cycle.
Where are we at? Dell screwed up. Dell pissed off customers. Dell pissed off the financial community. Dell is getting hammered by everyone with a word processor and the need for hit-based ad revenue. Dell has fixed some of these things and is looking quite active on fixing several others. Undoubtedly there are things going on in the background that we aren't seeing aimed at further improving the situation.
So, Dell is at or approaching rock bottom. Assuming they are not totally incompetent, they will have put things in place to fix the problems facing them. It will be a slow climb back that may take years, but they have started. Those sniping at Dell are not doing their homework and looking at the big picture. This is not the beginning of the end for Dell, it is the end of the beginning. µ |
