Dell Sustains Itself on Notebooks

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Dell Sustains Itself on Notebooks

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Dell Sustains=20 Itself on Notebooks
By Scott Ferguson
2008-05-30

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The PC vendor has a long = road=20 ahead, but there are signs Michael Dell's direction is = beginning to pay off.

For years, Dell built its business by producing = custom-made=20 desktops for consumers and selling large quantities of = these=20 PCs into the commercial space, especially to = enterprises in=20 the United States.

Then, consumers and IT buyers shifted to notebooks = and Dell=20 found itself behind as competitors such as = Hewlett-Packard,=20 Toshiba, Acer and others filled the void with even = more=20 affordable laptops. HP continues to lead worldwide PC = sales=20 thanks in part to its strong lineup of notebooks.

Since his return to the CEO chair, Michael Dell has looked to change all = that.=20 The company is moving away from its custom-order = desktop model=20 and moving deeper into laptops and focusing its = efforts on=20 overseas in markets such as China, India and Russia as = well as=20 SMBs (small and midsized businesses). When the Round = Rock,=20 Texas, company released its latest quarter results May = 29,=20 which showed that the switch to this new model had = begun=20 paying dividends.

For the quarter, Dell notebook shipments increased = 43=20 percent and revenue from laptops hit $4.9 billion, an = increase=20 of 22 percent from a year ago. On the other side, desktop revenue dropped 5 percent to = $4.7=20 billion. Dell also announced that half its sales = came from=20 outside the United States. Those numbers helped Dell = increase=20 its net income 4 percent to $784 million in the = quarter that=20 ended May 2.

=93The company has really done a lot of hard work = in this=20 area and I think you=92re starting to see it pay off = and I think=20 you=92ll see Dell have sustained, if modest, gains = during the=20 next several quarters,=94 said Roger Kay, an analyst = with=20 Endpoint Technologies Associates.

As Dell moves forward, the company now needs to = ensure that=20 it has the right mix of notebooks that appeal to = commercial=20 buyers and consumers. In the next few months, the = company=20 plans to move into the low-cost laptops market =96 examples of this =93mini-Inspiron=94 = are now posted=20 on one of the company=92s blogs =96 and Clay = Sumner, an=20 analyst with FBR Capital Markets, wrote in a May 30 = research=20 note that Dell is expected to have several dozen new = laptop=20 models enter the market within the next year.

=93When it comes to new products, Dell used to wait = and then=20 come into a new market as a fast follower and try to = beat=20 their rivals that way,=94 said Kay. =93Now, their = philosophy has=20 changed and they want to been seen more as an = innovator.=94

While the notebook has been good for Dell, it=92s = not an=20 all-encompassing cure for the company. While shipments = were=20 up, several analysts noted that the ASPs (average = selling=20 prices) for laptops continued to drop. While a drop in = ASPs is=20 good news for commercial buys and consumers, it means = Dell=20 will have to find new ways to cut costs in order to = stay=20 competitive with HP =96 a company that has worked to = reduce its=20 costs since it merged with Compaq several years = ago.

In a May 30 research report, John Spooner, an = analyst with=20 Technology Business Research, wrote that it=92s easy = for Dell to=20 increase its shipments, especially by shifting to = overseas=20 sales, but the company will have to contain its = costs.

=93It=92s far more difficult to do so and also = increase=20 profitability, which is Dell=92s ultimate goal,=94 = Spooner=20 wrote.

=93To that end, the company has been attacking = costs,=20 lowering its operating expenses and targeting = reductions in PC=20 design, manufacturing and bill of materials costs,=94 = Spooner=20 added. =93TBR believes Dell will be forced to continue = cutting=20 costs to offset lower average selling prices in both = PCs and=20 servers as the company expands its sales in emerging=20 markets.=94

A lot of this growth, however, depends on the overall strength of the economy, = and Michael=20 Dell and his management team noted that IT spending = will=20 remain slow throughout the summer. Kay believes that = any=20 economic difficulties that affect Dell could also = affect other=20 vendors, such as HP, and CEO Mark Hurd has noted that the U.S. = economy=20 remains =93spotty.=94

	Discuss Dell=20 Sustains Itself on = Notebooks

	This = is Scott=20 Ferguson. Please tell me if you see = improvements=20 in Dell=92s = notebook...

	>>> Post your=20 comment now!



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