As Desktop PC’s die and notebooks and netbooks boom, online technology company Dell is struggling to compete. Last year the company was forced to cut deals with retailers and even that appears to be a flop. Now a former senior Dell executive is claiming that they will struggle to survive and that they are a possible take over target.
They started off selling online, now Dell, who last year were forced to move into retail stores like Officeworks, in an effort to compete with the likes of Toshiba, Acer and HP is reporting a big 63% slump in profits and a 23% decline in revenue.
Even worse, the company has reported a 20% drop in notebook sales, which in Australia, according to GFK data, for the first quarter of 2009 grew by 43%.
Last week Dell dropped its first generation Mini 9 netbook from their product line-up, with the Mini 12 also set to be cut as Dell struggles to compete in this category.
According to GFK netbook sales grew 12% last month. Dell Australia has failed to return calls on this issue.
Its results come shortly after No. 1 rival Hewlett-Packard last month also reported lower sales and quarterly profit. Revenue at H-P’s PC division sank 19 percent to US$8.2 billion.
Dell’s results mark its third consecutive quarter of shrinking sales and profit and indicate that the computer market has not improved much since last year’s economic meltdown.
The company also reported a 34 percent drop in desktop PCs. The division that sells to large companies posted a 31 percent revenue slide. Overall, earnings slid from $784 million a year ago to just $290 million. Revenue was $12.3 billion, down from $16 billion.
Dell has seen its latest quarterly profits decline by almost two-thirds as the worldwide recession continues to hit sales of computers.
Dell said the global trading environment remained “challenging” and that they were now forced to “cut costs” even more than they have in the past.
What is not known is whether support calls to Dell have risen, as the company sources cheaper components for their range of notebooks and PC’s.
Dell has already moved to cut costs in the face of falling sales, reducing its global workforce by more than 9,000 positions over the past year.
While it made no new announcement on possible additional cuts, it said it was continuing cost reduction efforts.
“We’re continuing to transform the company on the cost side and delivering strong cash flow,” said chairman and chief executive Michael Dell.
A former Dell Australia executive said “The problem Dell faces is that the market is changing on them. Desktop PC’s are old hat, where initially they competed up against IBM, HP and Compaq they are today competing against big household brands like Samsung, LG and Panasonic. In the notebook market, design and function is changing quickly and brands like ASUS and Acer are really teaching them a lesson, particularly in the Netbook market and shortly in the tablet market”.
“Consumers want to walk into a store and buy a new notebook immediately; they don’t want to wait a week to 10 days or longer to get a Dell product when there is no real price advantage. As Dell cuts costs, their competitors are tipping a lot of money into research and development of the next hot products. They also have component and manufacturing advantages for memory, drives and display screens and over time I doubt whether Dell will make it. I suspect that a big Asian brand will buy them simply to get access to their name and distribution model”.
