I was actually quite startled by just how poor Dell's Halloween report on third quarter earnings, were. After taking out a whopping $300 million for a technology problem, that left a shortfall of $150 million.
ZDNet, in a thoughtful article by CNet's Michael Singer quotes Roger Kay, an Endpoint Technologies PC analyst who indicated the lead PC maker's founder seems to think the problem is with people who bought Dell's low-margin products to gain share against competitors.
"Kay points to Dell's 2004 annual earnings call, when the company declared a shortfall of about $10 million in the consumer segment. Founder Michael Dell and CEO Kevin Rollins became defensive, Kay said, after financial analysts pressed them on the shortage.
"Michael Dell basically said, 'Well, if we can't trade them up or sell a monitor, we really don't want that business,'" Kay recounted, " according to the article.
This seems to me to be more than a little outrageous. Declaring itself the low-price manufacturing leaders, Dell engineered a price war, causing competitors to consolidate such as HP and Compaq, or just get out of the business as IBM has done with its Thinkpad. I have no quarrel with this, because the user won. We got great computers for low prices.
But to smash competition, Dell seems to have cut corners in their current generation of computers, at least it seems that way, when you listen to the strident comments of an increasing number of its formerly trusting customers. They seemed to have cur prices and their own margins so thin that there is no room for even mediocre customer support.
Stop me if I have this wrong: Dell starts a price war and wins it. As a result the company makes shoddy products backed by shoddier service, and now they want to get out of the segment because us customers won't upgrade.
It's sort of a " let-em-eat-something-worse-than-cake" attitude. Methinks there's a Thinkpad in my future.