Dell still eager for battle to remake the company that bears his name
One-time PC kingpin latest to try to refocus business to make up for past mis-steps in face of decline in demand for PCs
But then the sector began to commoditise – in part, thanks to low-cost, fast-production manufacturers like Dell. As prices dropped, margins shrank, and, as Ireland painfully discovered when Dell shifted a huge manufacturing facility from Limerick to Poland, PC makers migrated operations to low-cost regions in an effort to improve the bottom line.
Dell, which originally found success by adeptly predicting and matching consumer preferences, has stumbled badly in recent years.
For example, it failed to get a smartphone or tablet into a market that clearly wanted both. And management seemed strangely blinkered about demand for its products. A year ago, internal sales predictions for the quarter were close to $300 million off the actual figures, the worst of seven consecutive quarters in which internal sales predictions were well off actual results.
In its most recent results, published in May, Dell – still the third-largest PC maker – posted a 79 per cent drop in profits, with PC sales down 9 per cent. Clearly, it needs new ideas.
The problem is that successful makeover stories among computer manufacturers – all of which are facing the predicted eventual demise of the PC – are rare. IBM, which recreated itself successfully in the 1990s, is being held up as a model for Dell, but IBM was already a far more diverse, and a more corporate and services-focused company, than Dell from the start.
Apple has been spectacularly successful at shifting away from making Macs as its main business to create high-end, high-profit devices and becoming a broker for content such as music, apps, books and video. But that option isn’t much of a fit for Dell.
And, of course, it was one Michael Dell who famously (and in retrospect, ironically) quipped in 1997, when Steve Jobs returned to the company he founded, “I’d shut it down and give the money back to the shareholders”. Perhaps now he wishes he’d bought Apple, instead.
Then there was Compaq, one-time principal rival of Dell, which had its moment in 1998 when it bought computing veteran Digital. That now seems even more bizarre than it did at the time, but it’s evidence of just how powerful PC manufacturers were in that period. Compaq was eventually acquired by Dell rival HP, itself now struggling, like IBM, to move firmly into new areas of computing services.
And Microsoft, though not a PC maker, became mighty as supplier of the machine’s most popular operating system, Windows, and the Office productivity suite. Yet the PC’s decline has seen those cash cows grow ever thinner, leaving the company struggling to find a reliable new income generator.
All of which suggests that even if, come September, Michael Dell does successfully win this war, like all war-mongers, he will find he has a more fearful challenge ahead with the post-war restructuring that will make or break Dell.