It is hard to think of a PC maker who has suffered more than Dell as the market turns its back on conventional computers.
The company was caught napping. Dell missed the smartphone boat and is woefully behind the pack on tablets. It has even lost market share in its core PC business to low-cost Asian brands like Lenovo.
Dell has two huge problems. Both were formerly strengths.
It succeeded in the PC business by outsourcing innovation. All the hard work was left to Intel and Microsoft. Dell focused on operational excellence. The company’s manufacturing, supply chain, marketing, delivery and support were first class. Dell is not a PC maker, more a logistics firm.
This meant its best brains, or at least the people with management clout, were not looking closely enough at the big changes going on in the background. The behavioral shift to mobile devices blindsided Dell.
At the same time, Dell was, and still is, closely tied to Microsoft. That company’s stumbles left Dell in serious trouble.
Now Dell is in danger of being to computers what RIM is to smartphones. Both companies were blinkered by their success. They had their feet down so hard on the accelerator they didn’t even stop to think if they were heading in the wrong direction.
Last week the company announced earnings were down 47% in its third quarter, a move it attributes to plunging PC sales. Almost every division of the company saw lower sales than a year earlier. Dell’s server and networking business was the exception, with sales up 11%.
Dell is attempting to move away from box shifting towards providing cloud infrastructure and services. Last week it announced plans to acquire Gale Technologies, an infrastructure automation software company that’ll give Dell’s cloud customers self-service management tools.
There’s no easy way out for Dell. Windows 8 and tablets are not going to save the company even if it build’s the world’s best tablet it is so far behind Apple and Samsung it would take years to catch up. And anyway, tablets are a consumer market – that’s never been a Dell strength.