Like the former high-school baseball star in the Springsteen song, Michael Dell knows how glory days can pass you by in the wink of a young girl's eye. His company, Dell, delivered yet another earnings disappointment last night. The former king of the PC industry cited higher-than-expected costs for the earnings shortfall. The excuse may be new but falling short of estimates has become old hat to Dell.
Not that long ago, Dell rode its cheap cost structure, build-to-order model and aggressive market campaign to the top of theh PC world. But after years of management missteps, the company finds itself looking up at Hewlett-Packard much the way General Motors finds itself trailing Toyota. About the only category in which Dell surpasses HP these days is in restructuring announcements. According to Mr. Dell, the current plan, which calls for more staff reductions and improved operating efficiencies, is apt to adversely impact near-term earnings growth. No kidding.
But I'll tell you what the restructuring plan isn't going to do -- it's not going to resolve the company's long-term problem any more than the dozen or so turnaround efforts have resurrected GM. And the reasons are much the same -- both management teams are too focused on the bottom-line and not focused enough on the big picture. Dell's problem isn't that the call center in Canada is overstaffed, it's that the company no longer possesses a significant cost advantage over the competition. Dell was never a very innovative company -- its strength was in the cost savings produced by the model. That cost benefit doesn't exist any more and simply adding new channels to sell product that's priced about the same as Toshiba, Acer and HP just isn't going to get it done.
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