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Dell moves away from build-your-own-PC

Posted Apr 03 2008, 04:18 PM by Kim Peterson
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Customization is a big business these days. Starbucks says it can customize 87,000 drink combinations for its patrons. Whether it be clothes, cars or gadgets, allowing customers to order a unique version is becoming a successful business model.

Not so for Dell, a company who made a name for itself on its build-your-own-PC policy. This week, the company said it will focus less on the build-to-order model and more on selling pre-built versions. The switch is part of the company's mission to bring down costs.

When it comes to computers, people don't need an extreme level of customization anymore, executives told analysts this week. Customers are giving up the luxury of picking their own computer features and opting for cheaper, pre-made PCs from other companies. Dell's share of the worldwide PC market has slipped to under 13% from 19% in 2006, and it has lost the title of top computer maker to Hewlett-Packard. Its growth has slowed to a trickle, while HP's 2007 growth could hit 30%.

Dell is now embracing the retail channel that has long been dominated by rivals, and has gone so far as to pull up stakes on the kiosks it installed at shopping malls. Give the company credit for trying to change with the times, although the change has been too slow so far.

Dell was also in the news today becuase it's going to have to cut more jobs than previously announced. It's fine to say you're going to cut 8,800 jobs, but don't go and hire for other positions if you want to reduce costs. That's exactly what Dell did.

So far, it has eliminated 5,500 of the 8,800 positions it announced last year. But it hired people in sales and customer support at the same time, so the net reduction has only been 3,200. The company won't say how many further job cuts it plans to make. Dell plans to close its desktop manufacturing plant in Austin, Tex., as part of the layoffs.

Dell also said it will buy back at least $1 billion in shares this quarter after repurchasing $4 billion last quarter. You'd think investors would be happy with all this news, but no: Dell shares rose less than 1% today to close at $20.12.

Dell aims to cut expenses by $3 billion a year by 2011. The computer maker is adopting a take-no-prisoners approach to cost-cutting this time around, execs told analysts.

"Every area of the company is being pursued," CEO Michael Dell said. He added that the "journey to transform the company" has begun, with major change taking place in five areas: notebooks, emerging countries, consumer, enterprise and small and medium businesses.

Analysts are responding well to Dell's plans. The company can be successful, wrote Citi analyst Richard Gardner, but it will struggle with soft demand for several more quarters until it sees savings in 2009 and 2010. And though Dell wants to cut costs, a Banc of America Securities analyst said that the company will have to spend money to grow in emerging markets and small businesses.

Comments

 

If this is really true, then Dell has totally missed the point of why people bought Dell computers in the first place.  Consumers in today's economy expect to get EXACTLY the features they want, and they are willing to pay more to get them (read Joe Pine's book called "The Experience Economy" for hundreds of more examples).  Dell's problem is not that it costs too much to "customize" a computer; with all those stock parts they have on hand, it's actually more cost-efficient to build to meet demand than to warehouse a product that someone may never buy.  Dell's real problem is that they outsourced their tech support to India or Pakistan, and now have the WORST customer "support" in the industry. Give them a call sometime, and see if you can get ANYONE who can actually HELP you instead of just read off a script...

Who really cares. I can build my own computer. What's really sad is that  companies have forgotten about good customer service, and they have no respect, or sense of obligation for the people that have worked for them, and helped them become successful. Everything these days is about the almighty dollar, the bottom line, and how big of a bonus the executives can get. Sure there's the right business decisions, strategy and vision, but if they'd start to refocus on what's really important, everything else would fall into place.

I also own 3 Dell's...reason?  'Customizing' options.  If I buy another one, it WON'T be a Dell!  Michael Dell needs to 'listen' to us...get away from China, Taiwan, India, and Mexico made parts!  We NEED quality computers, the thing Dell used to be, but has steadily declined ever since.  We NEED AMERICAN made parts with AMERICAN Tech Support!  Seems I've had my share of problems with my last 2 Dell's, and Tech Support doesn't know 'squat' about the problems without staying on the phone several hours at a time.  When I bought my first one, I had a problem and got an American Tech Support person in Texas.  This guy acted like he had 'built' the computer, and knew every little thing without putting you on hold for a few minutes while looking for a solution.  That WAS the support we used to get, but NOT now...so sad that Dell can't see through this clear wall.

As an ex-Detroiter whose father used to order custom cars, please note that Ford and GM DO in fact build 'custom' cars, with options specified by the customer. This was far more prevalent back in the '60's and '70's, but today due to the consumer's 'instant gratification' mindset, I would surmise that most cars are sold as is, off the lot. But you can still go to a dealer and order a custom car. I wouldn't because I don't want to wait several weeks.

Perhaps if Dell tried hiring service personnel that could speak clear English when you do have problems with their computers they wouldn't have so much customer dissatisfaction and sales volume loss. There is nothing more annoying than trying to communicate with someone whose mother tongue is a foreign language when you have a technical problem. Any computer manufactured can have problems, but not being able to rectify those problems is a guaranteed way of losing customers.

Derek...DUH!.  Walk into ANY dealership and you have been able to order a custom car for decades.  Dereck you must not have EVER  bought a new car.

Well derek..I'm due back on the planet earth. So long.

I bought my latest computer (a laptop) from Dell because I could customize it. Dell had the features I wanted for the best price. I like being able to upgrade only certain areas.

I'm disappointed that Dell will soon only offer pre built computers.

The only reason I buy Dell is so that I can configure my own computers. Now Dell will be like every other company.

As a long time  Dell buyer, I regret this decision.  I initially bought Dell because it tested their machines and provided a high quality product with all of the options I wanted.  Not a single computer company currently provides the same selection of options. Check it out. I believe the reasons for Dells decline is their poor quality control, failure to adequately test installed software and hardware and the total failure of their foreign service department. My 89 year old father recently bought a Dell 1720 laptop with a Dell wireless printer.  The computer included a "free" virus program that was not compatible with Vista.  It took more than 5 hours and a complete reinstall to rectify the problem.  This decision will not resolve Dell's situation.  Elimination of a poor management team and the termination of those senior management employees who have made one bad decision after another is the only way to address their issues.

Don I  agree.... Dell hurt a lot of small and large businesses,, and you can not have a business model based on price alone, it seems finally the avarage consumer is realizing that the small computer shop has always been the best way to go..you can always customize and ask for exactly what you want..it will cost a little more than a Dell or any of the big box PC Makers but hey,,,, your support is down the street not in India, Dell is the worst Company in the world..lol

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