Dell: Tough Economy or Incompetence?

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Dell (NASDAQ: DELL) expects the balance of its fiscal year to be difficult financially. The computer firm said the economy is softening. Critics say that the firm’s products are old and ill-suited to a period when tablets have become more important, along with smartphones. Dell has not, perhaps, kept pace with design and marketing advances made by Apple (NASDAQ: AAPL).

Dell said in its earnings report that “Based on strategic decisions to redirect resources from lower- to higher-value solutions and a more uncertain demand environment, the company also is revising its full-year revenue-growth outlook to 1-5 percent from the previous range of 5-9 percent.”

For the most recent period, Dell said, “Revenue in the quarter was $15.7 billion, up 1 percent over last year. And, GAAP earnings per share was 48 cents, up 71 percent.” A strong quarter, expected to be followed by weaker ones, in other words.

There is no evidence that Dell has made any progress in the tablet PC or smartphone markets. Its Venue Pro handset has not sold well, nor has its Streak 7 Tablet. Each is priced aggressively. The Venue Pro uses the Microsoft (NASDAQ: MSFT) mobile OS, which has proved to be a failure so far. That alone may be a strategic mistake by Dell.

The excuse Dell could offer is that no U.S.-based company has had success in the tablet PC or smartphone markets — except Apple. The products that have done well otherwise come from firms like Korean-based Samsung and Taiwan-based HTC. But the lack of success by other American PC and smartphone companies is hardly a proper excuse. Dell has revenue of $60 billion a year and product design and R&D capabilities that should be a match for its competition.

Dell has not delivered products that have stirred any demand in the new tablet and smartphone markets. There is no end in sight for those problems, so Dell’s numbers are likely to stay worse for longer than just this fiscal year.

Douglas A. McIntyre

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