Dell Bets Customers Will Continue To Want Laptops
Dell Bets Customers Will Continue To Want Laptops
Among the new computers: the Adamo, which is extremely thin and made of aluminum, and the Latitude Z, which features wireless charging and chrome-plated hinges.
The refined laptops underscore Dell's new focus on its laptop division, which once made generic boxes with little pizzazz. Now, the Round Rock, Tex.-based company is honing its image, offering products that appeal to customers who increasingly see a laptop as an accessory as well as a tool.
Dell's effort comes as the company redefines itself after years of drift. Once the world's biggest computer maker, Dell has slipped to third place. Companies like Apple Inc. (AAPL) set the standard for innovation, while Hewlett-Packard Co. (HPQ) and Acer Inc. (2353.TW) often beat Dell on price.
At its annual analyst day event, Dell executives took pains to emphasize the company wants to get back in the game, although not at the expense of profitability. "You don't want to be the share leader in something that doesn't make money," said Steve Felice, who runs Dell's consumer and small business unit.
Dell is more dependent on PCs than many of its rivals, some of which are diversifying into the higher margin services business more deftly than Dell has. Dell's PC division represented roughly half of Dell's $52.9 billion revenue in 2009.
In addition to a new commitment to design, Dell is structuring new ways to sell its machines. Once an online-only company, Dell is moving more forcefully into retail shops, a tactic it hopes will build brand recognition.
Over the past three years, Dell has struck deals with major retailers like Best Buy Co. (BBY) and Walmart Stores Inc. (WMT). The move has already paid off. Dell generated roughly $6 billion of revenue from those efforts, although Dell's consumer division operating profit is less than 1%.
Dell Chief Financial Officer Brian Gladden said in an interview with Dow Jones Newswires the slim margin is worth it because it will help Dell source computer parts at beneficial prices, something that will improve its overall margins.
"It's what we need to get component agreements," Gladden said.
Of course, there's no guarantee Dell's strategy will work. It's recommiting itself to laptops just as the computer industry moves toward a new type of computer: the tablet. Those devices will likely eat into the growth of the laptop market if they catch on, as sales of Apple's iPad tablet suggest they will.
Dell has also unveiled a tablet, called the Streak. But the device, which is currently available only in the U.K., is unlikely to provide a boost to Dell's performance anytime soon.
Gartner analyst Ken Dulaney estimates Dell fetches roughly $450 for each Streak, hardly enough to change the company's fortunes. "This isn't going to sell enough to make a hill-of-bean's difference for Dell's bottom line," he said.
Still, Dell's investment in laptop design--it just reconceived its flagship Inspiron line to be lighter and more colorful--will likely pay off.
Having a cool laptop well-liked by consumers could help raise the company's profile with key business customers, says Endpoint Technology Associates analyst Roger Kay.
"It gives you an identity," Kay said. "If consumers decide your product is cool, sales will bleed into the enterprise."
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