C|Net Details Dell’s Blunders

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Dell is laying off thousands of employees and plans to close a factory in Texas. The reason may be a series of strategic blunders combined with smart maneuvers by Hewlett-Packard, according to Don Reisinger in his C|Net blog.

At one time, Dell was king of the PC market, pummeling all competitors. Now, Hewlett-Packard has surpassed Dell in market share and is growing at a much faster rate.

It may have started when Dell had to restate its financials after some falsified accounting. However, the problems have recently been due to the fickle way customers prefer to buy their computers, Mr. Reisinger explained. There was a time when buying a PC in CompuUSA was just no longer cool, and commodity PCs could be purchased for less, with no middle man, direct from Dell. In time, however, customers seem to have learned that when a PC is cheap enough, the value added of touching a testing a PC (or a Mac) creates a better buying experience. Apple retails stores proved that.

By the time Dell realized that and tried to return to retail channels, it was too late. Hewlett Packard, who may have learned something from Apple, was already firmly entrenched at Best Buy.

The grand experiment with commodity parts and little brand distinction may have caught up with Dell, and as a result, Mr. Reisinger pointed out: "Sadly, thereis not much more Dell can do. In an environment where margins are extremely low and companies are forced to find innovative ways to entice customers, Dell is fighting an uphill battle. And although its revenue has grown, its growth has slowed to a crawl and things may get worse if they ever get better."

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