“Disappointment with Dell isn’t over yet. The world’s second-largest computer manufacturer posted fiscal third-quarter sales results that exceeded Wall Street expectations, but its profit performance and outlook for coming quarters left investors dismayed. Shares tumbled about 10%, to $25.25, in extended trading on Nov. 29, after the results were released,” Louise Lee reports for BusinessWeek.
“Dell’s expenses are ‘still considerably higher than we want,’ Chief Financial Officer Don Carty said during the company’s first conference call with analysts in a year,” Lee reports. “The results suggest a long-running turnaround attempt at the Round Rock (Tex.) company may be proceeding more slowly than Wall Street anticipated. The company is struggling to emerge from almost two years of slowing growth and slipping market share.”
“Brent Bracelin, analyst at Pacific Crest Securities [says], ‘It doesn’t look like the company has trimmed enough fat,'” Lee reports. “Earlier this year, Dell said it wants to reduce its workforce by about 10%, but as of Nov. 2, Dell had cut only about 2.5% of the 84,000 employees it had on Aug. 3. Carty insisted, though, that the company ‘is still driving to that [10% reduction] number.’ Carty added: ‘We’ve identified a considerable amount of low-value work.'”
MacDailyNews Take: Yeah, like everybody at the entire company. At least Mikey doesn’t have to worry about eliminating world-class industrial designers.
Lee continues, “Gross margin performance, too, didn’t meet some analysts’ expectations. Gross margin inched up to 18.5% of revenue, from 16.6% a year ago, but still fell below the 19% analysts were projecting. The company blamed component costs, saying they didn’t decline as steeply as the company was projecting. Shaw Wu, analyst at American Technology Research, questions why that’s the case, when some of Dell’s main competitors, including HP and Apple have recently enjoyed the benefits of low component costs.”
Full article here.
iSupply reports, “Dell underperformed the market with meager growth of 1.5 percent.”
“Company market share fell to 14.6 percent in the third quarter, down from 16.3 percent a year earlier. Dell posted the weakest growth among the Top-5 PC OEMs during the third quarter,” iSupply reports.
Full article here.
MacDailyNews Take: Why waste your money on an OS-limited, ugly, wedge-shaped Dell laptop or some ridiculous, neon-festooned Dell tower, when you can get an OS-unlimited Apple Mac portable, tower, or all-in-one crafted by world-class industrial designers?
The solution is, of course, obvious for Michael Dell: Shut it down and give the money back to the shareholders.
It’s interesting, as bad as Dell seems to be doing in the media…we just ordered a kajillion dollars worth of new Dells for 2008.
The government and Dell must have some kind of good deal going on.
Dell and the Government are MADE for each other
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When your entire business model is based on lowering costs, as opposed to providing value and additional features, you are slowly painting yourself into the corner of dwindling margins.
Don’t forget the Dell laptops that look like Klingon bathroom scales.
Those are awesome.
WOW
“We’ve identified a considerable amount of low-value work.'”
Boy or boy that ;s got to make the average employee at Dell stand up and yell… WOW were sure love around here!
If I was working at Dell I would be pissed alone about now and would have started looking hard for a new position!
Talk about making a guy wanted…
itanibro: It’s interesting, as bad as Dell seems to be doing in the media…we just ordered a kajillion dollars worth of new Dells for 2008.
And most probably with zero margin on the hardware deal, all of the meager profit coming from footnote provisions in the contract.
MDN word: “paid”
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“the government and Dell must have some kind of a good deal going on”
Yeah, you are right. It’s called an uneducated IT staff that is not willing to learn and continues to convince (scare) uneducated management that they have to stick to their PC’s and Windows. Plus, when you are so heavily invested in Windows ONLY programmers and programs, management buy’s every line of their propaganda about needing to stay with PC’s. Security is another line of lies they spew on management that makes absolutely no sense but because management is so scared (stupid) to know any better, continue their same ways. Then their is job security for these old dumb smuck’s. Keep them scared, tell lies and ALWAYS stay busy putting out fires, seems to be at every agency.
I should know, out of a 2000 employee agency, I (we) have the only Mac’s there. We have 10 now and what a battle it was but it was a good fight. They won’t (can’t) support our Mac and that is perfectly fine by me but then again, don’t need it. And isn’t it funny when everyone else is down, they (Management and critical information folks) come down and use our machines.
Every staff member is jealous and want them but, I’m not their boss.
@Fox
you must get paid by the apostrophe
Though our agency was buying Dells for several years, Dell decided it wasn’t making enough money on the contract. When they chose not to renew, the contract went to HP. The fact that we continue down that well trod route, while purchases of Apples are blocked, reflects several factors:
* an IT organization that continues doing what it’s been doing, buying what everyone else is buying
* a procurement process that refuses to consider total cost of ownership
* a management that is ready to throw more resources (money) at a problem, rather than look at the underlying technology choices
@Macromancer
That was a cla’s’sic! Kudo’s!
MDN is right!
Yet people and corporations still buy their crappy machines and proclaim that Windows and Dell (or HP) are “the standard.”
Raymond from DC is right too and I have seen much the same thing for years too.
The Mac Faithful speak:
There but for the grace of past excellence go we.
With emphasis on ‘past’.
‘We’ve identified a considerable amount of low-value work.'”
What, Dell only just realized they’ve been selling these low value computers?
Nicely said, Macromancer. I was trying to think of a nice way to say it. You said it well.
IT people, simply compare prices of Dell and Apple on the high end, play with both Vista and Leopard for a week, and put in perspective the total long-term cost(both in time and money) of both platforms…
and then your decision will already be made for you…it’s a no-brainer.
I find it amusing that the former king of cost-control is now having trouble controlling cost. It’s understandable I suppose, since their past performance was largely faked using “creative” accounting practices.
I remember when the Dell DJ Tit…um I mean Ditty was sppose to be the iPod Killer. They need to invest more and partner with MS and make the Zune Nutty, or Zune Ninny or whatever and take .50c from every Zune PeePee sold and give it back to users who got burned using Played for Sure.
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I am surprised at Dells problems. Just take the cost of the cheap components, add Mr. Dells salery and …. (oooppps I see the problem)….
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Maybe he should just sell the company. ???
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Dell continues to prove what others in the industry already know …
1. You can’t make money selling low cost, low value computers.
2. You can’t increase your revenue and profits by just controlling costs. Eventually you reach the limit on cost cutting.
Sell the company and give the stockholders their money back Mr. Dell.
Q: Future of Dell? A:Silicon Graphics
http://aarone.org/2007/05/29/michael-dell-in-2001/
Makes me smile every time I see the poster-boy for everything wrong in the PC world put his foot in his mouth. He does it so often where Apple is concerned that he must be patient zero for Hoof and Mouth disease…
While I have nothing good to say about Dell desktops and laptops, I have to say that their servers are decent. My company uses mainly Dell hardware in the datacenter, and the performance beats the socks off the Xserves we have, at least in storage. Plus, Dell’s server support is way better than Apple’s. Granted, the Dell hardware costs more, but at least in this case, it seems that you get what you pay for. I really hope Apple continues to improve in the server market- I’d love to see the day when they can offer better performance and support at a better price than companies like Dell. It almost feels kind of dirty using Dell in the datacenter, but we have to do what’s best for our company, and at least right now, that’s Dell.
I remember a few years back at a previous employer when the decision was made to change to Dell for all servers and desktops/laptops. The laptops were coming in literally by the truckload, and we were experiencing a roughly 15% DOA rate. The servers were having all kinds of problems as well, though those were mostly software related. I do not have fond memories of those days…
We’re a small business standardized on Macs in the office, except our online services (i.e., sales) are contracted out to a company that uses Dell servers (won’t even consider HPs!). Well, we just ordered 3 Dell servers a couple of months ago and one of them has been a complete dog, hardware failure after hardware failure. We are buying a new server now for internal services to our employees and you can bet its going to be a Leopard Xserve!
Apple is now worth 3 TIMES what Dell is worth. It wasn’t that long ago that Apple passed Dell, and now look at em.
Something is messed up at Dell. I waited almost 4 weeks for them to ship a 22″ monitor. A monitor! Insane.
Expenses aren’t too high. Profits are too low. You can’t give away computers and expect to make money from them.