For whom the Dell tolls

cotizacion de Dell vs Packard Bell
Posteo un articulo de la edicion impresa del economist, que me ha parecido interesante compartir con mi penosa audiencia:

"EVER since Michael Dell started a company to sell computers from his University of Texas dormitory room in 1984 at the age of 19 with a mere $1,000, he has profited from big shifts in the technology industry. First it was the commoditisation of components; then the rise of the internet as a sales channel through which to reach customers. However, the very forces that the company relied on for success are now responsible for its troubles.

This week Dell said its quarterly earnings, due on May 18th, would fall at the low end of its estimates. Dell's share price immediately tumbled 6% to around $25, its lowest level in three years. It follows a year of other stumbles. Dell's market share has declined and its growth rate has fallen behind that of the industry as a whole.

Dell remains the largest PC vendor in the world, shipping 37m machines worldwide last year and commanding nearly 20% of the market (32% in America). Yet the firm, with a business model that was once the envy of the industry, has found that its chief advantages—the lack of a physical sales channel and the ability to squeeze suppliers—have become the chief sources of its woe.

This is because the market for computer equipment has radically changed, but Dell's business model has not adapted in response. In the past Dell used its extremely efficient supply chain, lack of sales staff, paltry inventory and direct link to customers to offer low prices that rivals could not seem to match. But that tactic no longer works. Over the past year, as Dell slashed prices, it failed to gain market share as it had hoped.

Dell says the problem is that it dropped prices too much. Kevin Rollins, the company's chief executive, says it now plans to “reinvigorate growth” by investing in customer support and improving quality. On the surface, Dell seems the victim of the law of large numbers. It has become so huge—last year its revenues were $56 billion—that its double-digit growth rates have proved to be unsustainable. But deeper, more threatening forces are also now at play.

The first is the resurgence of rivals, which have caught up with Dell's low-price model. By driving prices down, Dell has unintentionally cut costs for its rivals too. “The supply chain has become as standardised as the components—the money has been wrung out,” explains Nicholas Carr, the author of “Does IT Matter?: Information Technology and the Corrosion of Competitive Advantage”. Dell, by not working through retail outlets, is still more efficient, but the cost benefits that this once brought have been whittled away.

The second factor hurting Dell is that growth in the computer business is coming from the consumer market and emerging countries rather than the corporate market, in which Dell sells around 85% of its machines. Increasing sales to consumers is difficult for Dell because individuals tend to want to see and touch computers before buying them. They also like to be able to return the machine easily if it breaks. Dell's lack of retail presence, once ballyhooed as a benefit, has turned into a grave disadvantage. Likewise, sales in countries outside America are often based on the advice of sales staff, which places Dell's “direct-only” business model at a disadvantage.

The absence of physical stores has also stymied Dell's attempts to expand beyond PCs, which account for more than 60% of its sales, into consumer-electronics products such as televisions. And large companies are increasingly purchasing their computer equipment as part of a package of services from consultancies to address specific business problems, says Matt Eastwood of IDC, a research firm. Dell has tried to develop a services division to remedy this, but it has nothing like the clout of rivals such as HP and IBM.

A third problem facing Dell is its exclusive use of Intel chips rather than lower-priced (and in some cases better-performing) ones made by Intel's sworn rivals, AMD. This arrangement lets Dell buy chips inexpensively and benefit from Intel's generous co-marketing programmes. But it has started to harm Dell's sales for higher-margin computer servers. In March Dell acquired Alienware, a maker of high-end gaming PCs based on AMD chips. That could represent a long-awaited first step away from its Intel-only strategy.

Taken together, the changes in how computers are made and sold no longer favour Dell's business model, explains Ben Reitzes, an analyst at UBS, an investment bank. As a result, he believes Dell's best days are behind it. The commercial environment now benefits HP, with its established sales channel, large and well regarded services division and efficient supply chain—a dramatic reversal of fortune, since the firm's dependence on sales teams and retail outlets had only recently seemed hopelessly anachronistic. In the past year HP's market share increased from 13.8% to 14.9% according to Gartner, a research firm, while Dell's shrank slightly, the first time this has happened since it became one of the chief PC vendors a decade ago. But in the cut-throat computer business, success never lasts too long.·