*NEWS*WILL OEM’s LEARN TO NOT COUNT ON…

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Date: Thursday May 10, 2007 01:05:00 pm
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  • Anonymous
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    When Will OEMs Learn Not To Count On Dell?
    When will OEMs realize it makes little to no sense to do a deal with Dell?
    Maybe
    I’ve been at this too long, but I can’t think of a single deal that any
    manufacturer has done with Dell that you would say has been a dream for
    both sides over the long term.Let’s go way back to the Hewlett-Packard
    deal, when the leader in printers sold its own branded inkjets through
    Dell. It’s an agreement that eventually fell apart because HP would not
    bend to Dell’s desire to rebrand the HP printer with a Dell logo.When
    that relationship broke up, Lexmark and others stepped in and said,
    “Hell, I’ll take that volume, and sure, you can tell the world it’s
    your printer.” As if that wasn’t bad enough, this gang of printer
    makers handed over the keys to future profits by allowing Dell to sell
    its own branded ink.Now—years into its Dell deal—Lexmark announces a
    less-than-stellar quarter, blaming it in part on flagging replacement
    ink sales and a tough pricing environment for low-end inkjets.

    Well,
    excuse me, but the whole world knows that the printer game is a
    razor-blade approach: Give away the printer and make your money on the
    ink. That being the case, why would you let someone else not only sell
    your product (or more accurately, give it away) but give away the
    profit engine as well—in this case the ink.It’s something HP realized
    and backed away from.These deals with Dell cause other issues as well.
    EMC’s agreement to allow Dell to sell the Clarion line under the Dell
    name is a good example.Talk with many EMC solution providers, as I do,
    and they will tell you that Dell undercuts them in price and that the
    EMC direct sales force favors Dell in the field. What often happens,
    solution providers tell me, is that the EMC direct sales force asks
    what brand of servers the customer is using, and if Dell is the answer,
    the business gets pushed that way.The trade-off for deals that aim to
    leverage Dell’s volume is lower margins in the channel and a whole lot
    of channel conflict. And now Dell is 10 percent of EMC’s receivables.So
    EMC, which has not exactly proven that it is a channel-centric
    supplier, not only is making it more difficult on itself in the
    channel, it is driving profits lower for its partners to boot.It’s
    always the allure of the volume that gets OEMs salivating over a
    relationship with Dell. Maybe it’s the need to produce short-term
    results for Wall Street that drives these pacts, but in the end, these
    deals never seem to be as lucrative in year three and beyond as they
    were in the first 12 months.

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