Dell continues to disappoint

The computer maker has tried numerous turnaround strategies, but nothing seems to be sticking.

By Jonathan Berr Nov 16, 2011 11:32AM

Dell (DELL) CEO Michael Dell has been trying to figure out what to do with the company he co-founded ever since he returned as captain of the ship in 2007. His ideas seem not to be working, as evidenced by Tuesday's disappointing earnings.

First he wanted to win over consumers with snazzy product designs like Apple (AAPL). "We are kind of in the fashion business," he told the Knowledge@Wharton website, run by the University of Pennsylvania's business school, in 2007. "We have been putting quite a bit more energy into this. It will be reflected in future products."

That didn't work.

 

Post continues below.

Dell lost the top spot in the PC market to Hewlett-Packard(HPQ) in 2006 and has struggled to regain lost ground ever since. The latest Gartner data show Dell ranked third in share of worldwide PC shipments at 11.6%, down from 12.2% a year earlier. China's Lenovo was second, with 13.5%, up from 11.1%. First-place Hewlett-Packard saw its share rise to 17.7% from 17.3%.

CEO Dell remains as enthusiastic about the PC business as ever. He even made fun of HP's plans -- later abandoned -- to exit the PC business. Dell, though, didn't put all his eggs in the PC basket.

As Bloomberg Businessweek reported, "Through a string of 10 acquisitions in less than two years, Dell has branched into areas such as IT services, computer networking, and data storage." That strategy hasn't panned out either.

IDC pegged Dell's
server market share at 15.6% in the first quarter, down from 16% a year earlier. The top two companies in the market, HP and IBM, gained share. 

Dell earned $893 million, or 49 cents per share, in the quarter ended Oct. 28. Excluding one-time items, it earned 54 cents -- 8 cents better than analysts had expected. The company, though, continues to struggle, and its quarterly revenue was little changed at $15.4 billion, missing the $16.2 billion consensus forecast.

During its conference call, the company forecast revenue growth for the year at the low end of its August guidance, which was an anemic 1% to 5%, partly due to a storage drive shortage. That forecast was a reduction from an earlier projection.

Dell trades at a price-to-earnings ratio of 8.2, well under the 13.69 seen in the sector and the 19.55 for the industry, according to Reuters. The multiple is among its lowest in five years.

Nonetheless, there is little to recommend about the stock.

 





4Comments
Nov 16, 2011 2:29PM
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Smile Dell's done really well given the world economic situation and the PC market head winds. Look for Microsoft's Windows 8 release to give them a boast in 2012-13. They're definitely not an Apple though.
Nov 16, 2011 4:27PM
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Had a Dell and never had anything but trouble from the time I ordered it. I went with ACER.
Nov 16, 2011 7:15PM
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With the way Dell treated me over a billing dispute, they should go out business.  Letters, calls produce frustration as they refuse to explain how they came to the disputed amount they said I owed them.  It got to the point I just gave up trying to get it straighten out.  Then the threats started.  Pay up or else. 

 

I bought an item and returned it.  They gave me a credit for the item,  In the next payment statement I notice the credit was removed and then they added the price of the item a second time into the bill.  That was the beginning.  I paid the balance off of my account minus the disputed amount.   I wrote them asking them to explain the the debit, credit and debit, and if they could show me with the explanation that I owed them money I would pay.  They kept billing me for the item adding late fees and penalties.  A final letter telling them I wasn't going to pay until they explained how owed them money was sent.  I never heard from them again   They turned my account over to the first of the many collection agencies who contacted me.

 

All the collection agencies left me alone and dropped the collection once I sent them the paper and explained the dispute.

 

Dell is just a bad company to give your business to.   They'll do back flips to get your business, but once they have it, good luck dealing with them.

 

Nov 16, 2011 6:56PM
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Everything I own, Tv's, Computers, cameras all Dell. I am pretty new to all this electrocic stuff in the last few years & I read someone say "Bad customer service", REALLY?  I tell ya what for having such bad customer service I get top notch service everytime I need help. Maybe you're not buying the assistance plans offered? The only problem I have at all is understanding the customer service people and that's only due to their accent. I express that to them, they slow down and then ask if I can let them access the computer to fix the issue. Dang, easy breezy. I love Dell products and the help I get using them.
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