*NEWS*DELL’S NEW PLOY

[Anonymous]

dell’s new ploy

Dell  investors,
still gasping from their darling’s southward trajectory this year, got
a bit of relief this week as the stock made a U-turn and gained about
2% as techs rallied. Many are hoping that Dell can parlay its play in
the printing business into more gains on Wall Street — but Goldman
Sachs hardware maven Laura Conigliaro says not just yet.
As we all know, consumables, whether razor blades or ink jet
cartridges, deliver repetitive sales and higher margins, so analysts
figure that as Dell sells more printer supplies, it will see a
substantial upside. Conigliaro says that printer margins for the giant
PC maker should move from break-even to a more substantial mid-4%
range. “While notable, this is still not enough to move the needle in a
meaningful way as far as earnings — and therefore stock performance —
is concerned,” she said in a recent note to clients. (Goldman has an
investment-banking relationship with Dell.)
Dell, meanwhile, continues to get lots of bad press in an area that was
once one of its biggest strengths: consumer satisfaction. Media critic
and tech watcher Jeff Jarvis started the public pillorying in his blog
in June, recounting an ugly series of encounters with Dell support as
he tried to get his new computer to run. Now BusinessWeek is piling on,
running an anecdote-filled, 1,600-word story that even steers readers
to an “I hate Dell” Web site.
Dell could well argue that anecdotes are nothing more than, well,
anecdotes, and the company points to a 35% increase in consumer
satisfaction as measured by its monthly survey of 50,000 customers. But
customer-satisfaction stats may not wash with consumers.
In an earlier generation, people used to say, “No one ever got fired
for buying from IBM.” There’s no equivalent aphorism regarding Dell,
but years of flattering coverage in the consumer and trade press — not
to mention favorable word-of-mouth — made Dell seem like the safe buy
for your family. (Dell’s business computers are a separate story.)
Earlier this week, Dell announced the launch of a new, high-end line of
notebook and desktop computers called XPS. As you’d expect, the new
line has many improvements to what we used to call “speeds and feeds.”
More interesting, though, is this: XPS customers are promised hold
times that are half as long as those the hoi polloi have to suffer
through, as well as access to specially trained technicians.
Good deal for the high-end buyer, but what about the rest of the
customers? “We are focused on reducing hold times for all of our
customers,” says Jennifer Davis, a Dell spokeswoman. Dell, she said,
has recently opened four new call centers, including one in India and
another in El Salvador, and is ratcheting up the size of its support
staff.
Dell’s support operation was designed along the classic “break-fix”
model — as in, “My hard drive failed; fix it.” But now that the home
PC is the centerpiece of an array of digital devices and related
software, customer help has become much more complex. Davis said that
30% to 40% of the calls Dell support centers now receive are for issues
that aren’t covered by warranty. The company expects to roll out in
November programs that will give customers more ways to get support for
non-hardware-related issues.
Those measures better help. Dell’s high-volume business model didn’t
work so well in the last quarter, when the company sold a record number
of PCs, but at prices too low to bolster profitability. A buyers’
strike would not be pretty.

[Author]

October 5, 2005 at 12:13 PM