Monday, August 20, 2012

DELL INC.: THE NEW GAMBIT

Michael Dell is betting big on smartphones to make up for the lack of any ‘killer app’. Is this a two-years-too-late strategy?

From a strategic perspective however, this diversification of Dell isn’t an option, it is a necessity as the world heads faster towards convergence. Even the once-famed semiconductor wars that were once rumoured to remain in the PC domain at large, is being increasingly fought on mobility devices. Dell needs a new revenue generator, especially after its server business is likely to sink faster than imagined before, in the face of higher competition (the latest being Cisco’s entry into the server business with its next-gen Unified Computing System). Michael Dell may have found his revival kid. But the search wasn’t easy; he’s had his own share of initial jitters. Earlier, the company had planned to launch its first smartphone in February 2009. But amidst low economic activity and disinterest on the part of the prospective carriers for the prototypes thereof, Dell had to adjourn its plans. But it’s a new revival plan from Dell, and markets like China, India & Brazil will certainly play a big role. The company recently signed a pact with China Mobile, which has a subscriber base of 500 million and has a strong network of retail outlets. Dell has also signed a deal with service provider Claro, which covers over 2000 cities in Brazil nationwide.

There are however two challenges ahead of Dell. First is its weak distribution network, as industry sources confirm, “The company’s support system of minuscule count of vendors will only lead to a bad memory for the company in the long run.” Second, Intel (which is scouting for vendors to source its latest Medfield and Moorestown chips in smart phones) is reportedly in the final stages of talks with Nokia, to team up for smart phones to be launched by the end of 2011, which again is some blow to Dell’s ambitious plan to join hands with the largest chipmaker in the world. With the financial performance of Dell falling constantly since 2007 – significantly due to the economic slowdown – Dell might still make it through to better times simply because of the upswing. But for whatever it is worth, Michael has to take more such gambles on ‘killer apps’... sooner than later!




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