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 user 2005-02-15 at 9:57:00 am Views: 78
  • #10273
    Steamrollered by the Dell Machine
    Dell finds it hilarious that HP
    and Sony fund researchers to come up with new ideas

    Feb.05 – Of all the cards dealt to Carly Fiorina, the
    now departed HP diva, there was one that just couldn’t be played. Dell. She
    fought like a tiger to merge her company with Compaq, hoping that two of the
    more innovative-minded computer makers might bring on some agita for
    Michael Dell and his CEO Kevin Rollins. But last spring at an industry confab,
    Rollins was boasting that Dell reaps more than 100 percent of the
    profits in the entire industry. Sounds weird, but think of it this way: Dell is
    making big money while everybody else combined is operating at a loss. Sorry,

    In Dell’s view, only one big player has a right to exist
    in the business of selling Windows-based PCs—the firm Michael Dell founded in
    his college dorm room. Profitless rivals should take up something with a better
    chance of putting change in their pockets. In fact, IBM, once the gold standard
    in PCs, recently did just that, selling its laptop business to a Chinese company
    called Lenovo. And now that Carly has left the building, there’s speculation
    that HP itself might bail (though at the moment the company is holding

    Why can Dell pile up the bucks when others rarely use
    their black-ink cartridges when printing out quarterly results? Dell’s
    direct-sales model gives it dollars others share with retailers. Its low
    component costs keep prices down. And the business is run superbly. What’s more,
    Dell saves money by not spending its shekels to seek major breakthroughs. That
    path (as opposed to spending R&D money on things like product integration)
    “squanders shareholder money,” said Rollins.

    Dell finds it hilarious that companies like IBM, HP and
    Sony fund researchers to come up with ideas that break the mold. PCs, says Dell
    spokesperson T. R. Reid, have reached a period of “standardization.” They aren’t
    the glamorous gizmos they were in the industry’s early days. They are
    commodities, largely undifferentiated devices loaded with the chips made by
    Intel, running the software made by Bill Gates’s minions. Dell doesn’t like the
    term commoditization—it makes PCs sound cheesy. But the company nonetheless owes
    its success to it, because commoditization eliminates differences between its
    products and those of its competitors. That means it competes on cost, service
    and business model.