Dell has an impressive history as a low-cost, online retailer. Their process and supply chain management tactics are the stuff of business school studies. Despite their success, Dell's stock is down about 30% for 2006 and 60% from 2000. Dell appears to have run into a critical problem: consumer patterns.
Dell has long ignored the consumer as a customer. While H-P has over 30% of sales to consumers and Apple has an even higher number, Dell has averaged around 15%. Dell has repeatedly acknowledged this pattern with CEO Kevin Rollins declaring, "We have never focused on the consumer as a company."
I've found that to be true. My IBM laptop was exhibiting a major problem and I needed a solution quickly. IBM couldn't get me a new model for eight days. So I figured why not try Dell? Since Dell was just down the road in Texas, I thought it might be quicker. Wrong. The computer took the same eight days, but was 25% less expensive. However, I needed to act quickly. I ended up going elsewhere for an immediate solution.
Dell is a high quality company with talented management. The consumer market has expanded rapidly while Dell has been focused on the patterns of the business market. In the meantime, Apple and H-P have been appealing to consumers with their stock prices up handsomely. I continue to believe that Dell has the right idea - direct on-line marketing is the superior low-cost approach. With some sexier features and some higher cost services, Dell could resume growth. The current stock price implies that Dell can't.
Dell was at about $20 per share during 2006. While it briefly rose to $24 in the following year, it ultimately was taken private at $14. Their culture of commoditization never really paid off for them nor were they able to refocus on more "value-added" approaches. The private ownership allowed for them to make a radical reboot and come public in 2016.
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