Tuesday, March 3, 2009

CEO Memo to Michael Dell

When his company was in trouble almost two years ago, Michael Dell stepped back into the CEO role. But despite his efforts, the last few years haven’t been good for Dell. Last year, Dell's shares went down by over 60%, losing much more than its competitors. In 2006, Dell commanded 19 percent of the worldwide PC market share and led its closest competitor, HP, by about 3 percent. Since then, the company's worldwide market share has slipped to below 13 percent, while Acer and HP gained ground.
Last week HP also overtook Dell as Intel’s largest customer accounting for 20% of Intel’s revenues. Dell is now second at 18%.

Dell is trying various things to get out of this slump. From integrating its marketing efforts (by forming the 4.5 billion Enfatico) to diversifying its product portfolio by introducing new products like the portable music players, the new mini and maybe even a smartphone.

In my memo I will try to explore the options Dell is pursuing (and can pursue) and will hopefully try to recommend the best ones.

Sources:
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5 comments:

  1. JZeibertMarch 5, 2009 at 10:00 PM

    Dell definitely needs the help. It would be interesting to explore what sort of advantages Dell still has, if any, that it can utilize over HP, since it seems like most of the ideas that they have now can be easily replicated by HP. If they could get some control points in the market and create a completely new away to build a customer base it would be an interesting change of events for them, esp as HP looks to services and Dell is still trying how to compete within hardware.

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  2. Scott CaffreyMarch 7, 2009 at 8:25 AM

    I recently read a report on Dell tring to get into services. One answer was acquiring Accenture or NetApps. These would be large multi-billion acquisitions but well within Dell's capability.

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  3. caropreseMarch 9, 2009 at 11:54 AM

    After reading this article (http://money.cnn.com/2009/02/27/news/companies/lashinsky_hurd.fortune/index.htm) I have the feeling that Dell doesn't have a chance anymore... They let others (HP) to catch up and have lost the original competitive advantage.

    My feeling is that if they actually make it after the recession, they could be acquired by other PC makers.

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  4. Matt SalterApril 2, 2009 at 2:51 PM

    I think it's clear that Dell needs to expand its business if it wants to have a profitable future. We saw in class how everyone has been moving up the IT value chain and that the lower levels are becoming commoditized. If Dell just sticks with computer/laptop manufacturing, it can look forward to a future of razor-thin margins and decreasing earnings as computing becomes increasingly mobile.

    Right now, Dell has over $8 billion in cash and over $3 billion in operating income. As Scott pointed out, it definitely has the financial capability to acquire businesses with more profitable prospects. I think Dell needs to figure out which direction makes the most sense, and then pursue one or more strategic acquisitions.

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  5. StarNovember 13, 2016 at 2:04 AM

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