There are rumors going around that Dell (DELL) will fire its chief of operations and its head of marketing. The PC firm’s turnaround is not going so well.
The answer to most corporate strategy failures is to dump the people in charge. It gives the illusion that moving the chess pieces will make things better.
According to The Wall Street Journal, "The moves are a sign that Mr. Dell — who founded the company 24 years ago in his college dormitory — is adjusting the strategy he implemented in 2007 to help restore growth at the company."
The plan probably won’t work, because nothing will.
Dell is trapped by two forces and it has little control over either of them. It is not alone in facing a tough economy and the perception that a computer is no more than a tool which should be bought at the lowest reasonable price. Apple (AAPL) is up against similar issues. Mac sales fell in November. It is starting to dawn on consumers and businesses that letting the old PC sit on the desk another year is fine. If it has to be replaced, spend as little as possible.
The share prices of Apple and Dell are both off about 60% over the last year. That might be a coincidence, but it probably is not.
The two US companies face low-cost producers like Lenovo and Acer. These companies have large market shares in Asia and are moving aggressively into the US and Europe. Apple and Dell may also have made an error by selling so many of their machines at retail outlets. People assume that a computer for sale at Wal-Mart (WMT) is supposed to be a bargain. If it isn’t, buyers may just walk. An expectation of low prices may drive away consumers who are disappointed when they don’t get the deal they expected.
The rate at which global PC sales are growing is slowing. It may actually drop next year. A few companies, especially HP (HPQ) have diversified into IT services and software. This gives the firm a few extra businesses to fall back on as computer sales falter.
Apple and Dell are in the hardware business. It is a simple explanation about why they are troubled, but it is an accurate one.
Douglas A. McIntyre