Dell taking more risks
CEO Michael Dell maintained for years that the company was only interested in pursuing high-volume markets. Then what's with all the niche products these days?
Much has been made of Dell's retail makeover, but it's actually part of a larger trend toward experimentalism.
The company that has largely avoided unproven product categories is jumping all over them suddenly. Case in point: several years ago, when Microsoft was pushing tablet computing, Dell was fairly adamant that, no thanks, tablet PCs weren't something the company was interested in making.
"I think it is really unknown at this point how big the market is," CEO Michael Dell said in a 2002 interview about tablet PCs. "Dell, of course, likes to participate in high-volume markets, and until we can determine the size of the market we are not ready to decide at what level we will participate."
Fast-forward to late 2007, when Dell, the Latitude XT. Tick forward some more to this week when the second version, the Latitude XT2, was . Tablet computing, to Microsoft's chagrin, still has never really taken off--tablets comprised 3.25 percent of the worldwide notebook market in 2007, according to market research firm IDC. Yet, Dell's staking out its claim in that category.
So what's changed? Well, almost everything.
"The old Dell was about how everything had to improve with scale. In other words, any fixed cost investment had to get more profitable with volume," said Roger Kay, analyst and president of Endpoint Technologies. But after the leadership change a year ago, "Michael (Dell) said there were no sacred cows when he took back over."
Now Dell can't seem to stay out of niche markets. Besides the Latitude XT, in the last year Dell has launched a, a consumer-friendly all-in-one desktop, and began offering Linux pre-installed on some PCs. Plus, there's constant chatter about the company .
The PC industry is moving toward increased mobility, so tablets and rugged notebooks are part of a larger trend. But they also represent opportunities that Dell can't afford to miss anymore.
In Dell's heyday, its mammoth commercial computing clients would choose a variety of machines they wanted Dell to supply; if one of them was too much of a niche product, Dell would simply partner with a manufacturer that did make it.
"But now they're saying, we don't want to keep giving away those opportunities because that's decent margin (being left) on the table," said Richard Shim, PC analyst for IDC. Now, "they go out and create their own versions of these products."
Within the overall trend toward mobility, commercial clients, and even consumers, are demanding more and more specific usage models, and Dell, it seems, is trying to adapt.
"The market is evolving beyond generic solutions. There are new opportunities in more specialized products," said Shim.
Evolution seems to be the name of the game down in Round Rock, Texas, these days. The company has undergone aplan since Michael Dell stepped back into the executive suite as CEO.
Along with that has come this marked shift toward experimentalism at the 20-year-old company. Though Dell's hallmark for its first two decades in business was its sharp, efficient supply chain and direct-to-customers sales model, now you can find a Dell almost anywhere you look: Best Buy, Staples, Wal-Mart Stores, and more.
Its product choices are different, too. "In the past, Dell would adopt new technologies faster than most, but new products more slowly," noted Kay. While it was happy to move from one processor generation to the next fairly rapidly, Dell was far more circumspect about getting into a niche market like PDAs or music players. Of course, Dell's expertise has always been in the enterprise market, which isn't particularly fast-moving. But targeting consumers is a different animal--they expect more product innovation and faster product cycle times.
In trying to garner more consumer attention, Dell also has been more adventurous, with firsts for it like colored laptops last summer, the stylish design of the XPS laptop line, and the XPS One, an iMac-esque all-in-one PC. Dell even went as far as co-branding the XPS gaming line with World of Warcraft.
"It's more like they're dropping a lot of bait in the water to see what works," Kay noted.
Sure, Dell is trying a lot of new things, but it's got to do something different. No longer the largest seller of PCs overall, it's also recently fallen behind the Acer-Gateway-Packard Bell behemoth in notebook sales.
"They have to be risky to reverse their misfortunes here," Shim said. "That takes time when you're trying to change your personality. I'm sure they'll make missteps along the way because everyone does. But the positive is that they are making these changes. The writing is not just on the wall, it's in neon."