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It’s official: HP is the biggest PC-maker with Dell falling to the number two spot after the latest earnings reports from both companies. Dell has been hit with a stream of bad news recently, including unexciting profits, a costly battery recall, an SEC investigation, a volatile share price, and the death of its MP3 player. What happened? And where does the company go from here? Well, in a move that’s getting polarized reactions, Dell wants to reinvent itself with an initiative called Dell 2.0 (Is the name hip or an eye roller? You decide). Here are the details:
The new initiative will include getting into emerging markets, improving and simplifying the Dell website, revamping technical support, tightening the supply chain, and putting more emphasis on the services market.
As part of the initiative, Dell recently bought ACS, a British IT consulting firm widely known in London’s financial district. Apparently, Dell wants to move into designing and installing computer infrastructures rather than just focusing on basic PC support. It plans on making the move in typical Dell style: undercutting the competition with lower prices. As it is now, the services side of Dell brings in around 10% of total sales or $5 billion a year, though margins on services are much higher than margins on hardware. And its services division is growing by more than 20% a year compared to only 5% growth for hardware.
But there a couple factors that skeptics (with whom I happen to agree) are pointing out. Dell may be putting itself in competition with some of its best customers (i.e. service firms that recommend Dell hardware for their clients). And another concern is how to compete on price with the rise in inexpensive services coming out of India.
And this move comes after Dell already changed its advertising campaign and pledged a $100 million investment to better customer support including a new remote help system (see Dell New Ads: Trade In Speed & Price for “Personal” and Dell to Improve Support: $100 Million Investment + New Remote Help).