“In recent weeks, Dell has held a virtual fire sale, offering many PCs at rock-bottom prices. That may be a bonanza for the tightwad consumer, but the super-low pricing once again is taking its toll on the world’s largest computer seller,” Louise Lee reports for BusinessWeek online. “On May 8, Dell said it would post fiscal first-quarter revenue of $14.2 billion, at the low end of its earlier projection of $14.2 billion to $14.6 billion. Worse, Dell said it expects earnings of about 33 cents a share, falling short of a projected range of 36 cents to 38 cents, including an estimated three cents of stock-based compensation. The announcement sent shares down by almost 6% in extended trading.”
“The earnings warning is the latest in a year-long string of financial disappointments for the Round Rock (Tex.) company. Just two years ago, Dell was posting quarterly sales growth rates of more than 18%. By contrast, the current $14.2 billion projection represents a growth rate of only 6% over the year-ago level,” Lee reports. “And analysts don’t believe Dell’s strategy of bargain-basement pricing will change any time soon. ‘We expect more of the same, limiting the near-term upside in margins and profits,’ says Brent Bracelin, analyst at Pacific Crest Securities.”
“The trouble for Dell is that unit volumes aren’t compensating for price reductions. Besides hurting Dell’s sales and profit, sluggish unit growth is also eroding market share, another key measure of overall health,” Lee reports. “Dell’s key rivals, including Hewlett-Packard and Acer, meanwhile, saw market shares increase, according to IDC. The gains reflect competitors’ growing appeal as they’re increasingly able to match or even beat Dell’s prices to steal sales. ‘Those companies have gotten more price-competitive,’ says Cindy Shaw, analyst at Moors & Cabot Capital Markets. “Dell doesn’t have the price advantage any more.'” Lee reports. “And compared with some of the competition, in particular Apple Computer’s machines, Dell’s products simply don’t stand out, further eroding its appeal to customers. While Dell’s computers are mostly still plain, neutral-colored boxes, ‘when you look at an Apple Mac, you want to touch it and bring it home,’ says Shaw. Dell’s big challenge now is getting more shoppers to swoon over its products before its longtime domination over the PC industry slips away more.”
Full article here.
MacDailyNews Take: If you think that we just can’t get enough of this story, well, you’d be right. Dell makes nothing special or unique. Dell assembles dull boxes that try to run Windows, just like everyone else’s dull boxes. Dell’s bait and switch website is a maddening morass of mediocrity with coupon codes. Dell’s high point (like Microsoft Windows’) is in the rear view mirror. Why would anyone in their right mind — or not locked into a contract — buy a Dell when Apple Macintosh runs the world’s most advanced operating system plus Linux and even Windows (if need be), too?
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Payback? Wall Street didn’t like Apple passing Dell in market value – February 09, 2006
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BusinessWeek: How can Apple be worth more than Dell? – January 20, 2006
Steve Jobs emails Apple team: Michael Dell not the best prognosticator, Apple worth more than Dell – January 16, 2006
Apple now worth more than Dell – January 13, 2006
Apple primed to pass Dell in market value – January 12, 2006
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Financial Times: Dell and Microsoft can never hope to attain Apple’s Mac aura – January 10, 2006
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IDC: Apple shows rapid growth, holds 4.3% U.S. market share on 48% growth – October 17, 2005
Michael Dell say’s he’d be happy to sell Apple’s Mac OS X if Steve Jobs decides to license – June 16, 2005
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