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Dell is still hungry for more.
Kevin Rollins, CEO of the worlds largest PC manufacturer, said Dell is going through a shake-up—something he said seems to happen every four or five years at the company—but that it will emerge stronger than ever.
The Round Rock, Texas, PC maker has faced a series of problems of late, some of which Rollins said were of its own doing.
The combination of a more aggressive Hewlett-Packard—which has made gains in cost competitiveness and service and support—combined with slipping satisfaction among Dell customers contributed to a slowdown in Dell normally swift growth, in turn yielding smaller than expected profits for its first fiscal quarter.
The slip-ups have caused some to question the ability of Dells direct-sales model to be effective in the future. But Rollins said he is confident the company will turn it around.
“Every four to five years in Dell we have a period of readjustment. I dont know why…but its been true in the 20-year history of Dell,” Rollins said, in a question and answer session at a Bear Stearns technology conference in New York City.
“However, this time, as weve been working through that, were in far and away better strategic position, management position and leadership position then ever before.”
“A few tweaks” to the system, Rollins said, are being made to get Dell back on track.
Dell, in recent weeks, has unveiled plans to spend $100 million to revamp its customer service and support, pledged to offer new products—it has inked deals with Advanced Micro Devices and Google, for example—and begun offering delivering more aggressive pricing.
Rollins said he expects that the combination of more favorable pricing—Dell was offering its Dimension 1100 desktop and Inspiron 1300 notebook to small businesses for a starting prices of $299 and $449, respectively, after rebates on June 13—and improved service will bring customers back to Dell, allowing the company to continue on its upward trajectory.
Dell has historically grown its unit shipments far faster than the market rate. But during the first quarter, its shipments increased by only 10.2 percent, versus a market rate of 12.9 percent, market research firm IDC said.
But Rollins was careful to avoid any mention of a PC price war, choosing instead to point out what he says is a continuing gap between Dells costs and those of HP, which Dell can use to its pricing advantage.
“I think that what weve seen is as competitors have gotten better theres an opportunity for use to accelerate [Dells] overall growth. We can do that with price leverage,” he said.
“There are periods of time when you get tightening, markets get a little slower. So utilizing price to get sales going and capture market share is the right thing to do.”
As part of its efforts, Dell has retrained about 5,000 of its support personnel in an effort to help them resolve customer issues more quickly.
It has also rolled out a new online support tool that allows a technician to take over a customers system remotely to help solve software issues such as driver problems or assist in diagnosing spyware problems.
Dell will also shake up its product lines. The company will, for the first time, offer AMD Opteron processor-based machines in its server line, beginning in the second half of 2006. It has also partnered with Google to deliver the search giants software pre-installed on some Dell PCs.
Rollins said that customers requested the AMD processors and also desired to use Google software and Dell is meeting their demands. But he stopped short of saying whether or not Dell would offer more AMD-processor products, such as in its desktop PCs, in the near-term.
“I dont know,” he said, in response to a question on a AMD-based Dell PC. “We havent announced anything beyond what weve done today. The commitment is really back to technology and customer demand. AMD has great products. Well have to see how that rolls out…”
To be sure, Rollins said, Dells product line shakeup will include numerous new Intel-based systems.
The PC maker has adopted all three of Intels forthcoming Core Microarchitecture processors, including the Intel Xeon 5000-series processor, also known as “Woodcrest,” for servers and Core 2 Duo chips for desktops and notebooks.
Rollins described Dells Intel partnership as strong.
New Technology
“I think now were on a very firm footing in terms of new technology [and] competitive pricing,” Rollins said. The companies current relations are “good, if not better than weve had in the past.”
But Dell Rollins also pledged to offer customers the best technology available.
Thats one reason Dell chose to being pre-installing Google search software on its PCs, Rollins said. He indicated Dell could offer more Google-ware over time.
“If you ask customers what theyre using and what they want, its Google,” he said.
Although he was less clear on whether Dell will use Tulsa, a forthcoming dual-core Xeon MP chip, designed for the multiprocessor server space. Dell will offer its AMD Opteron servers in that space.
“Our strategy is pretty clear. That is well utilize the greatest and best technology anywhere,” he said. “As Intel comes out with Woodcrest and then quad core later this year…I have no doubt well use those products, because customers want them.”
However, Rollins didnt mention Tulsa by name in his response.
“Whether its Intels products or whether its AMDs products our commitment is to give customers the very best when they need it,” he said.
Despite all of its efforts, some analysts have still expressed concerns about Dells direct-sales business model and the models ability to maintain momentum in maturing markets such as the United States and Europe or to tap emerging markets in geographies such as Asia.
Rollins countered by saying that not only did Dell continued to grow in Western Europe, a market where sales slowed in the first quarter, it sees many opportunities in emerging markets such as China and India.
The Dell model “has not proven to be a barrier anywhere, really because we dont focus on first time consumers first.
“The first-time consumer is the last customer we go for” when entering new markets. Plenty of opportunity exists in other segments, such as starting with multinational businesses, Rollins said.
“Theres not much to not like about China right now,” he said, when describing the market opportunity and Dells team of employees there.
Dells management team—described as a team of business athletes by Rollins—might have slipped up earlier this year. But it has set out to right the company, he said.
“They are winning junkies. They dont like to do anything but win,” Rollins said. “When theyre not winning every game, theyre not happy campers.”
Rollins, too, remains in the game, he said.
“Yes. I am” in it for the long run, he said.
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