Dell's Cuts--And Problems--Go Deep And Deeper
Is Dell running the risk of becoming the Yahoo! of the PC sector? Seems that way. The company has been spiraling, locked in fits and starts of recovery and morass for the better part of four years, and now there's word that already aggressive cuts and reorganization scenarios apparently weren't aggressive enough.
We now get details from Michael Dell himself that the 8,800 jobs Dell originally had in its crosshairs apparently didn't get the job done as Dell tries to reduce expenses by $3 billion annually.
Dell's comments come at the company's first analyst meeting in three years, saying that he is "not satisfied with the current state of affairs and are on a mission to fix it," adding that every area of the company is under review. We heard earlier this week that the company would be shuttering a whiz-bang PC manufacturing facility in Austin, Texas that would cost 900 jobs and a billion dollars in expenses.
The fact is, Dell's got big problems. Still. Expenses were severely out of whack last year, and judging by the moves and news this week, it appears they continue to be. And while so many key tech players, including Hewlett-Packard,Intel,Microsoft, Cisco and others have diversified revenue to a far more global profile--something that could insulate them against a domestic recession--Dell still gets 53 percent of sales from U.S. customers.
I think everyone who covers Dell on Wall Street was hoping for a far clearer picture of the company and its prospects at this two-day analyst meeting, especially after Dell had turned a blind eye toward analysts for so long. The company's initiatives to sell more pre-configured systems, rather than the build-to-order models that made it a success in the first place, is intriguing.
But there's no guarantee that the strategy will work--and worse, runs the risk of turning Dell into another also-ran against so many other companies doing the same thing. Meantime, visibility into the company's future is still terribly clouded and that's where the Yahoo! reference comes in.
Yahoo! is a big, lumbering giant that lost its way and got bogged down in too many, indecisive managers who slowed innovation to a glacial pace; the same could be said for Dell. Yahoo's future remains so cloudy because the company either can't, or won't, spell out what it specifically plans to do to take on Google .
The same could be said for Dell as it tries to come up with a way to stem Hewlett-Packard's momentum, or even Apple Inc.'s. Yahoo is relying on its co-founder to come back in and save its future; same for Dell. Yahoo's shares have been dead in the water for years; same for Dell.
The only difference, and it's an important one: Yahoo and its shareholders have an exit strategy on the table, courtesy of Microsoft. Dell's only got itself, himself, and so far, there's no indication as to when this company can get itself back on track. Or if it's even possible.
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