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Where Does Dell Go After Losing 3Par?
crimeandpunishment writes "It was the big deal Dell wanted in a big way. But now that it has lost out to Hewlett-Packard in the bidding war it started for 3Par, where does Dell go in its effort to diversify its business and move into the higher-profit area of selling technology to other companies? The company faces significant challenges, largely due to its lower-end focus, and because many of its competitors beat Dell into branching out. One analyst says, 'People see [Dell] as box-pushers'."
Dear Dell shitbags: Optiplex GX270 fiasco you went to great lengths to hide which you're finally getting sued for. Enough Said.
"To err is human, to mod Funny divine."
and say unreservedly that Dell can go to hell.
and going back to their successful business model would be a good first step.
Hmm, where have I heard that one before?
Maybe they'll get lucky and invent the next great... um... portable music player? No, that didn't work... PDA? No, that worked, but the market disappeared into smartphones... Smartphone? No, beat to the punch 4 or 5 times over... Printers? Tablets? TVs? No, no, and no.
Dell's problem isn't that competitors beat it into branching out. Dell's tried branching out tons of times. Dell's problem is its founding business model - mass-assemble PCs using standardization and volume to bring costs down - doesn't work on any of the new electronics markets. And even the things that went well were crippled by bad design, bad materials, or just blame bad timing. (For instance, their multi-function displays are nice... but who wants to carry around a multi-function display with their laptop?)
Let's put it this way:
Apple charges a lot more money for its products and they still sell a lot of them. It's not the price that makes Apple successful.
Dell built its business on customer support and service. While it's quality has more often been pretty good, it has remained more or less on par with its competitors. What makes them better is their support and service accessibility.
Sad thing is they started sending all their call centers out of the U.S. and they wonder why they started losing business? "Everyone else is doing it" was the wrong answer in the case of Dell. I remember when the change was announced. Many business customers started leaving Dell immediately before Dell did an about face on it. Still... they did it anyway... just slowly and quietly.
So, "so-so" to good quality, and a pretty decent online database for machines and a not-difficult means of getting device drivers and such.
If Dell wants to rally, they need to bring their support BACK to the U.S. That will be the only way they will be able to differentiate themselves. And if they cost a bit more, I don't think people will mind so much.
After losing 3com and 3par to HP, they always can try with 3M.
3Par is not worth it, HP is just being bully and want to get rid of the HD partnership so they can push their own storage.
For Dell and their customers this is a relief as they would have burned a lot of their cash reserves, now HP have. 3Par was impressive yesterday tomorrow somebody else will show how storage should be done.
Dell's problem is its founding business model - mass-assemble PCs using standardization and volume to bring costs down - doesn't work on any of the new electronics markets.
As I see it, they either need to embrace their role as a builder of boxes and switch to a dividend rather than growth company - or they need to stop selling low-margin shit. How much do they make on a $400 laptop? Why do that to themselves? If they are afraid that their store will not be a "one stop shop", then make the store a separate corporation and sell cheap shit from other companies - only put the "Dell" badge on high-margin - and preferably high-quality - merchandise.
W..w..W - Willy Waterloo washes Warren Wiggins who is washing Waldo Woo.
Does "faces significant challenges" mean "Is no longer capable of satisfying the bloated expectations of parasitic wall-streeters because it basically just produces an unsexy commodity in quantity, like steel or potatoes" or does it mean "is seriously fucked because corporations will only buy if they can get a "total enterprise solution" from one company, by cutting a single PO?
The former seems like a largely perceptual problem. Earth to investors, not every industry segment can double its profit every quarter forever, and if it can, it is probably a scam. Civilizations are built on largely low-margin commodities. Cement, steel, sulfuric acid, corn, potatoes, x86s. Go find a Ponzi scheme if you can't deal with that.
The latter, though, seems like a real issue for Dell, one that could seriously impact their mid to long-term viability.
No. Their shareholders demand that Dell produce an ever increasing value to the company - forever and ever. They have to get bigger or the stock value will decline and the CEO's options will not be worth enough.
Alex, I'll take keybindings not used by Emacs for $400....
We are going 5PAR.
Fuck systemd. Fuck Redhat. Fuck Soylent, too. Wait, scratch the last one.
I buy Dell computers from the refurb market. They are cheap and plentiful. I love 'em! I have nearly 150 small form-factor systems and laptops. Because of the indecently low cost I get them, I keep spares on the shelf. I don't fix them, I just swap the HD to another box. The parts are easy to swap in and out and I have experienced a high level of up-time with all of my systems. GX150 were the first systems, then up to GX260/270/280. Now that those systems are leaving the refurb market, moving up to the GX520/620. There is nothing wrong with being a box-pusher. Someone has to make the boxes and that I will eventually buy off refurb.
Bearded Dragon
They're making billions as box pushers, isn't that good enough?
If they paid dividends, maybe.
Since they don't, they are expected to grow. And grow they have not.
Technically, they've roughly doubled their revenue in the last 10 years, but their net income has been flat or declining.
If you are an investor, you have other choices in the growth game - like competitor Apple with their 10x revenue growth and corresponding net income growth. Or HP with their 3x revenue growth and significant net income growth.
They are being out-grown by their competitors. If they aren't in that game anymore, then they need to issue a dividend and compete for retiree money.
W..w..W - Willy Waterloo washes Warren Wiggins who is washing Waldo Woo.
1.They have little long term vision, but are instead obsessed with making the goals for the next reporting period.
2. The "executives" are a series of "wonder boys" that come in, discard everything that wasn't their doing, and re-invent the wheel with their brand on it. They usually are there long enough to screw things up and then get picked up by another company.
3. Middle management has a siege mentality, never knowing when one of these "wonder boy" executives is going to come in and fire them, replacing them with their buddies.
4. The actual workers spend a lot of time wondering what the hell is going on and who is in charge this week.
When Fascism comes to America, it will call itself Anti-Fascism, and tell you to give up your guns.
No. Their shareholders demand that Dell produce an ever increasing value to the company - forever and ever. They have to get bigger or the stock value will decline and the CEO's options will not be worth enough.
Actually many stock options are crafted in such a way that any dividends paid will be treated as notionally received by the CEO and reinvested in stock, so this is not so much of a reason. A better reason is that public companies no longer believe in paying dividends. The rationale nowadays is that you own a stock in the hope that it will go up in price so you can make money by selling it to someone else... who will presumably be buying it in the hope that further down the line they can find someone else to offload it onto. It's the "Greater Fool" theory of investing - nobody buys a stock because they hope to get money from the ownership, they hope to make money by finding a "greater fool" than themselves to buy a fancy stock cert that is functionally just a piece of paper (or electronic equivalent).
There is nothing inherently wrong with a company retaining money for growth rather than distribution, it's just that it has become an idee fixe. CEOs don't want to start paying dividends because dividend-paying stocks are perceived as having limited growth potential. The reluctance to pay dividends leads to ridiculous results, like Apple and Google sitting on huge cash-piles larger than some Fortune 500 companies with no particular plans as to what to do with them. Still, the lack of need to ever raise new finance frees the Board from having to justify investment decisions to banks or investors.
Instead they do stock buy-backs to artificially increase the price of the stock - which only helps those investors who sell out, not those who continue to hold the stock. Or they go on "empire building" expeditions where they blow cash on wild merger & acquisition activity that is more about them becoming CEO of a larger empire than about building value for shareholders.
Look at the 3Par events. The final valuation is ludicrous at 325 EBITDA. Yes, what 3Par do is important to the future of IT. Yes, they will experience growth over the next few years. But this valuation already prices in an ultra-optimistic scenario. How can HP shareholders get a profit from this deal? In finance you take risks to earn rewards. I can certainly see a risk that 3Par will underperform, but how can it reward HP by overperforming? I just don't get it.
HP actually made their own CPUs PA-RISC which they made up till 2008. They worked with Intel on the Itantium and seem to be the only people that can make money selling them.
IBM well IBM is IBM. They have have made more different CPUs than you can shake a stick at.
Dell takes parts and puts them in a box. Kind of like a mom and pop computer store.
Dell doesn't make crap and we have one of there server boxes in our rack. It works very well but we could have gone to newegg and put together something just as impressive.
See my blog http://ilovecookes.blogspot.com/ for light hearted technical information.
Dell always was a low cost knock-off product. They were never innovators, and never developed a real R&D function in their company. They basically sold the same thing as the other guy, except for less money. The difference is that HP, IBM, and for a while, Compaq would create products that Dell did no have at all (there was a time where you could get servers from IBM, Compaq and HP, but not from Dell). Dell would wait until the component manufacturers would have the commodity parts (depending on market size that would be weeks, months or a year or so) , and then would bring a less expensive machine to market. For desktops, since Intel provided chipsets and reference boards, there was no lag, and often Dell was quicker than others to put the latest CPU in a desktop. HP, IBM and Compaq had to finance building machines in advance and shipping them to resellers. Dell would take orders this week, and make and ship the PCs next week. This practice worked in Dell's favor as components would drop in price, allowing them to lower prices faster than their "channel bound" competitors.
Ironically, the last of the big 80s and 90s PC makers is Apple, who has continued to invest in R&D, still has a big channel (even though they have retail stores) and is using their ability to create new products (iStuff) and/or superior products (Mac) to extract very healthy profit margins from a recession market. Dell wants some profit, but is stuck being the low cost leader and doesn't have the internal resources to fix the problem, and their friends in Redmond aren't exactly producing the electrifying new software that makes people want a new PC.
-- $G
Is no longer capable of satisfying the bloated expectations of parasitic wall-streeters because it basically just produces an unsexy commodity in quantity, like steel or potatoes.
Wall street has no problem with low margin commodity type companies. They just expect them to describe themselves as one and to act like one, not to pretend that they are still a growth company when all that differentiated them has come to pass.
Here's the problem: Wall Street doesn't like companies that make a profit and pay a dividend. In today's upside-down growth-obsessed "free market", it doesn't really matter what companies make or sell. The only thing that matters is the accumulation of cash so they can buy other companies. There are even bidding wars in leveraged buyouts. Think about that for a second. And a Department of Justice that has never met a merger or takeover they didn't like.
Apple has 40 billion in cash. Stock price is in the stratosphere. P/E of 19.23(ttm). They still don't pay dividends.
We've got companies who are trading at 3 times earnings, booking huge profits and still not paying a dividend. Then we've got companies trading at 25 times earnings, booking huge profits, and still not paying dividends. Companies aren't using that cash to start new projects, or build new plants or hire people or pay dividends. They're just accumulating. If they did pay dividends, it would mean some of that cash that's sitting in corporate mattresses would actually end up in the economy. But that's too "long-term" of a play for the captains of industry There are actually companies whose capitalization is less than their cash on hand. So they're capitalization is 30 billion and their cash on hand is 35 billion. They get taken over and the new buyers realize a 5 billion gain before the ink is dry on the sales contract. Paying dividends has become a signal that you're not "growth oriented" enough, that you're not "aggressive" enough. In other words, that you're paying attention to your core business instead of looking to buy or merge with your competitors and suppliers.
Short term thinking and "free market" fantasies have mutated big business into something that only benefits the number of people you can fit around a conference table. Profits are up, but for most working people, income and quality of life are down. How long you think that's going to last, and what will our society look like after another decade of that trend?
You are welcome on my lawn.
One analyst says, 'People see [Dell] as box-pushers'.
Those of us who have been engineers for a while are disheartened to see Hewlett-Packard in the same light.. Dell has always been Dell, but HP was once truly a company worthy of respect.
The higher the technology, the sharper that two-edged sword.
By family income and wealth. Compared to before 1980.
The cost of things at Wal-Mart doesn't really have any impact on quality of life. In fact, you could say that the lower the cost of things at Wal-Mart, the lower the quality of life.
There's no question that we are worse off than previous generations, whether or not you "reign in"(sic) Wall Street.
In 1956, a single breadwinner, earning the average wage, could expect to put a couple of kids through college and own a nice single-family home and provide health care to all the members of his family, even buying a new car every 5 years, all without having to use a credit card. More so, after 25 or 30 years, they could expect to have paid off their house entirely and have a comfortable retirement. Today, that's simply not possible.
Please don't try to measure quality of life by how many people have big-screen TVs.
Your reckoning would be dead wrong.
You are welcome on my lawn.
They are very good at supporting their customers when things go wrong. I have purchased a number of Dell computers and have had excellent service with them over the years, particularly when I've had hardware failures. They attend to them courteously and promptly.
HP on the other hand does not support its products. I purchased a very expensive color laser printer from them just a few years ago, but when Windows 7 came out and I upgraded from XP, I discovered they refused to make a new driver for this printer. I and I learned thousands of other customers like me were left high and dry. I will never, ever buy HP equipment again. They simply don't support their products.
Given that most computers these days are essentially built from commodity components, service becomes a much more significant issue in terms of total cost of ownership. With Dell I have come out ahead when it comes to service, but with HP I had a lot of hidden costs when it comes to support for the inevitable repairs. HP may look sweet when they are new, but they become lemons a lot sooner than they should because of HP's determination to cut service and support costs at the expense of their customers.
Dell takes parts and puts them in a box.
Somewhere there ought to be a place for HP or Dell or both to get out of the race to the bottom and actually produce high quality hardware with first class customer service, at a price ~30-40% above what the no-service no-name brand of the day charges.
Telephone support I could live without. But both HP and Dell's websites make me ill. There seems to be a problem out there where as soon as marketing gets in charge of a web site they water it down, take all the useful information out, and make it impossible to use to get anything done.
And service manual? Can anyone say service manual? Or a way to easily find and purchase important spare parts like fans? As opposed to "accessories"? Or information about which chipsets are used in a certain model, so you can check hardware compatibility?
Sun used to be pretty good (borderline excellent) in this area, but Oracle is killing that off in a hurry. Oracle's website and visible level of support is far worse than Sun's in any case. Oracle apparently does not want to be a small and medium business market provider of anything.