I’ve posted my thoughts here.

Read the results here.

I’ve said too many times over the past few years Dell is fading into oblivion.

Dell still has a large presence in the enterprise. I work for a large IT outsourcing company and we use Dell servers exclusively in our datacenters. Additionally, we use EMC storage arrays and SAN infrastructure purchased through Dell. Their share of the consumer market may be falling but as business purchases pick up, they could continue higher. Margins on sales to businesses are more generous than the consumer end.

Like for like revenue is down 20%. I don’t understand why it’s described as 15%. The other 5% is revenue they bought via Perot systems.

correction: my mistake - although Dell discussed Perot Systems revenue for the past quarter, it will only be consolidated in the current quarter. And the balance sheet does not yet show the exchange of $4B cash for goodwill. At the current rate, it will take Dell 20 years to get back from Perot gross margin the cash it spent buying Perot! It was a horribly expensive purchase.

incorrigible - 20 November 2009 08:25 AM

Dell still has a large presence in the enterprise. I work for a large IT outsourcing company and we use Dell servers exclusively in our datacenters. Additionally, we use EMC storage arrays and SAN infrastructure purchased through Dell. Their share of the consumer market may be falling but as business purchases pick up, they could continue higher. Margins on sales to businesses are more generous than the consumer end.

It’s understood Dell’s primary revenue and earnings driver is the enterprise market. I don’t think eliminating for the most part the direct sales model for consumers has been a winner. Distribution through 3rd party retailers pressures margins, virtually eliminate “upsell” opportunities and in my view has led to a loss of brand value. Form my observations the product shipped in volume to retail channels is a different class of product than what’s sold to enterprise customers and I think this has reduced the value of the Dell brand at retail leading to a loss of price control and a subsequent loss of margins.

HP is not sitting by idly and the competition in the enterprise market is fierce. Dell servers in my view are the one bright spot in the product line. However, servers alone will not provide for an adequate return in terms of sales and earnings to justify a $30 billion market cap.

DawnTreader - 20 November 2009 01:04 PM

... It’s understood Dell’s primary revenue and earnings driver is the enterprise market ... HP is not sitting by idly and the competition in the enterprise market is fierce ...

Indeed very fierce.  Cisco is entering the server space.  Oracle is buying Sun.  Also, the incumbent big blue.

Dell wasn’t helped by pent-up demand for boxes with Windows 7 loaded on them.  I think many were on the sidelines until Windows 7 came out, given the excruciating upgrade of Windows 7 if you had XP loaded. 

I think Dell will surprise to the upside this quarter.  I’m not putting money in Dell, because they build commodity products that compete on price.  But I think they’ll be able to beat guidance the current quarter, nonetheless.

Dell is not dead.  They have a solid enterprise market, even will dull products.

Mercel - 21 November 2009 05:01 PM

Dell wasn’t helped by pent-up demand for boxes with Windows 7 loaded on them.  I think many were on the sidelines until Windows 7 came out, given the excruciating upgrade of Windows 7 if you had XP loaded. 

I think Dell will surprise to the upside this quarter.  I’m not putting money in Dell, because they build commodity products that compete on price.  But I think they’ll be able to beat guidance the current quarter, nonetheless.

Dell is not dead.  They have a solid enterprise market, even will dull products.

Dell isn’t dead. Dell is in irreversible decline. The company will not return to the top of the PC pile and margins continue to be pressured. A 15% drop in revenue and a more than 50% drop in earnings can not be corrected overnight. Dell has focused on cost cuts to improve profitability and is not not benefitted from the move from direct sales to sales through retail stores. Acer is eating the company for lunch and coming back for more.

Much of the growth in the PC market today is in netbooks, not premium-priced PCs. Oracle, HP and IBM have formidable enterprise hardware sales operations and even a return to brisk enterprise sales will not come without increasing competition.

Perhaps following the acquisition of Perot Systems the company should jettison its consumer division, eliminate the costs associated and emerge as a lean enterprise player without the low-margin, higher cost consumer operation. There’s no brand value remaining in the consumer market.

DawnTreader - 21 November 2009 07:29 PM

Perhaps following the acquisition of Perot Systems the company should jettison its consumer division, eliminate the costs associated and emerge as a lean enterprise player without the low-margin, higher cost consumer operation. There’s no brand value remaining in the consumer market.

Agreed.  Dell has consistently proven itself INEPT at creating any brand value for itself with the consumer.  The latest notebook is ridiculous, with its carpal tunnel inducing keyboard only a hand surgeon could love.  What SJ said of MS is true of Dell:  They have no taste.  The best Dell can do is copy Apple, and it will fail at that because it’s WINTEL and they are followers.  The pace of technological change does not favor followers.

To give some credit the company has remaining credibility in the enterprise market, especially in servers. Perhaps it’s time for the company to emerge as a lean enterprise player leaving the consumer market behind. What’s available under the Dell brand in the consumer market is not the same product generally sold to enterprises. The split in product quality is not producing good results.