RSSCan Dell Recover Directly?
By Scott M. Fulton, III | Published February 3, 2007, 11:19 AM
Regardless of the outcome of the Dell shareholders' class-action lawsuit against their company, the task before the once and future CEO of Dell Computer is gargantuan: to restore customer faith in the nation's #1 brand, and the world's #2 brand, in computers.
Carmi Levy is senior research analyst for Info-Tech Research Group, and helped us assess the shareholder suit Friday afternoon. Levy was able to make a preliminary assessment of the complaint, and assessed it this way:
"The plaintiffs allege that Dell withheld all of this information because they were fearful of such a plunge [in stock value]. So in order to maintain share values at an acceptably high level, they hid some of the bad news and shunted it under the carpet. According to the lawsuit, there were personal opportunities for gains for their options to be valuable if the stock price was above a certain amount, and they allege rather pointedly that a number of the senior executives at Dell cashed in significantly by selling off in virtually all cases, well over 90% of their personal holdings."
While the press (BetaNews included) noted first and foremost Intel's involvement in the suit, with the allegation that it kicked back rebates to Dell for exclusively purchasing Intel CPUs, and that Intel knew Dell was using those revenues to pad its losses in sales revenues - a charge Intel flatly denied to BetaNews Friday - the charge which probably struck at the heart of Dell most deeply was not a direct one, but an implied one: that Michael Dell's fabulous "Dell Direct" business model had crumbled, and rather than fix it, he and others allegedly covered it up.
"There were voices, years before this came to a head, that were saying that the Dell Direct business model at some point would run out of gas, and was already showing signs of running out of gas," Levy told BetaNews. "Those voices were somewhat muted in the early part of the decade, but certainly as we got to 2003, 2004, they started to gain prominence. Certainly by 2005, the voices were a fairly strong chorus."
In the Dell Direct model, the company only purchases the components it needs to build computers per customer order just days ahead of manufacturing those orders, rather than months. Consumers pay Dell immediately; meanwhile, the company has a whole month to pay suppliers for the parts it orders. So the company doesn't need overwhelming capital or parts or inventory on hand to fill consumer needs.
"It's a double-win," Levy proclaimed. "You're protected from eroding, commoditized equipment prices, and you also get to hold onto your customers' money for a month before you've got to do anything with it." It's the model that made PCs Limited from a garage operation to a multi-billion-dollar enterprise, and that garnered praise for Michael Dell as the consummate American businessman. Did it really fail?
The Dell Direct model has been compared with the Wal-Mart business model, where a company uses its own existing purchasing power as leverage to gain more purchasing power. This way, Wal-Mart can dictate the terms of its quantity purchases, and can drive many of its suppliers into becoming exclusive Wal-Mart providers. But the comparison with Dell starts to fall apart when talking about the complexities of the products Dell is producing.
"We aren't selling pink, plastic lawn flamingos," remarked Levy. "These are complex pieces of equipment that aren't just commoditized boxes, despite what everyone would like to believe. They're complex pieces of high technology, so quality control across the board throughout the supply chain becomes absolutely critical. But if you cannot support those - if you try to take, for example, money out of your support infrastructure by reducing levels of customer service, on your toll-free numbers and on your Web site - then that will have a differentially greater effect with complex devices that typically require this kind of support as opposed to less complex devices that a Wal-Mart would sell.
"Who needs post-sales support for a shirt?" he added. "Almost everyone needs post-sales support for a computer."
Support is where Dell notoriously cut costs, especially by outsourcing many of those services overseas. In addition, the company may have also cut quality-of-service controls, including testing of received parts prior to manufacture. "Quality of service fell significantly, customer complaints rose significantly, the Dell brand was tarnished in the process, and Dell has been struggling with that ever since," said Info-Tech's Levy. "Certainly as Michael Dell returned to the fold this week, he committed to putting more money into customer service, and so revamping that process is nothing different than we've been hearing for the last year."
Next: Is this a job for Michael Dell?
you know what is the best thing to do? BUILD YOUR OWN COMPUTER!!! :)
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|Let customers with a concern about Dell reach top management. Instead of them hiding behind Customer Service Reps. I have a story I'd love to talk to Mr Michael Dell about.
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|Dell should hire Carly Firoina to fix there problems.
She really helped HP!
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|Dell charged me twice for a computer, and then insisted I prove to them that they had taken my money twice! I had to fax bank statements to India (I'm in UK) proving the payments had been taken. I was buying a house at the time and that screw-up meant I almost ran out of money. It took them 6 weeks to give a refund. I remember on one phone call to them I was passed to no less than six departments, and I had to tell each one the same story over and over again.
Did they mess me around? Yes.
Did they treat me like a fraudster? Yes.
Were they sorry? No.
Will I ever buy another Dell? No.
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|Can you blame Dell for the problem based on one experience? No.
Did you bring this to a supervisor's attention? No.
Did Dell offer you a free replacement PC? No, because you didn't complain to them--instead you complained here in the betanews forum.
Please feel 100% free to correct me if I'm wrong, and I'll apologise.
P.S. : Get the business warrenty and you won't have to speak with people in India. Better yet, email for customer service and technical issues, it's always better. If you read your contract details or checked your warrenty options/support options, you would have known about the India call center and chosen another support contract or another pc vendor.
Okay--maybe I'm wrong, just saw you live in the U.K. I would think it works almost the same way it does here in the states, but I do not KNOW that it does, so I should not assume what I assumed. If I'm wrong, I'm sorry...
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|You make a good point. I have whined about my bad experiences with Dell on BetaNews before. I can't say for certain that there is a definite correlation between my bad times with Dell and Dell's current problems, but I noticed that Dell's support budgets had been slashed and I'd had a hell of a time getting support out of them.
I did complain to a supervisor, but the supervisor proved to be illusive most of the time too. I eventually got the problem sorted out via Dell's UK office, which did do a good job. My refund cheque eventually came from the UK office.
I usually read the small print closely but I didn't see any mention of either the sale or support being handled on the other side of Earth.
I will give Dell another go if they return to the former position of offering good support.
Hmm, the business warranty. I'm tend to avoid spending on an extra warranty, but it may have saved me a lot of hassle.
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|"to restore customer faith in the nation's #1 brand"
Without knowledge of where this site is hosted, what country is "the nation"?
Perhaps the editors of Betanews should head back to school and study English and Geography...
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|Oh come now. Everyone knows that if it is not specifically stated, that it is America. After all, we're the greatest nation on earth, so we're too good to tell you...
Okay, right or wrong in those statements, you guys do need to be more careful about that sort of thing Scott, I agree.
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|Like my Dell 8300, No problems with it, the problems were with Microsoft and I. Hope Dell get's it's act together.
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|Yup, 8300 came out when Michael was in charge so it will be great. 8400 and beyond? Overall, they stank as far as failure rate and such next to the 8300--and that's when Rollins came along.
Seriously, if only coincidence it is one hellova coincidence that when Michael Dell left, Dell went to !@#$. Perhaps it is just coincidence though...
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|HP is #1 since late 06
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|Three Dells and counting...perfectly happy....
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|They are not #1 anymore. Personally I do not run anything but HP. So far their computers(desktop or laptop) have been rock solid for me and I have had about 5 of them. I have a cousin that has a Dell and has problems with it.
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|Can they wind the clock back 10 years?!
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|BRING CUSTOMER SERVICE BACK TO THE UNITED STATES
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|that would be expensive and doesn't mean it will be better.
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|But at least we would be able to understand the guy on the other end of the line and they get irate when you ask them to repeat what they've told you.
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|Dell is meant for business' hence when a business customer calles for support, they get americans. it is not cost effective to pay a bunch of people in america 20k+ more a year for people who only have one or two $2000 or less computers.
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|Don't buy DELL.
Install a whole bunch of junk on the systems to make money back from their customers. That is not nice.
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|It's become far less intrusive as all of the pre-installed software is actually useful to some (Quickbooks, MusicMatch Jukebox, AOL) and all uninstalls quickly.
I remember when their bundled software was much worse. Hell, who here doesn't remember bundled software from 5 or 6 years ago that provided UIs over Windows 9x? Yech.
If DELL conservatively make their margins by bundling software, I'm happy. After all, I get to save money!
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|yeah, you know, so they dont have to charge you more. i guess its too hard for you to reformat with the included disk that puts the drivers and all back on but not the extra software?
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|1. Call centres in the USA and Canada
2. Fix your financing and stop treating customers like criminals
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|Sounds like a good start.
However, I gotta tell ya, they have gotten so bad, I will never buy another Dell. They had better hope there aren't too many ex-customers who feel like I do.
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|Will NEVER buy another Dell. My wife has had TWO go south on her. Try to call to get tech support? (long pause while I laugh hysterically.)
Just getting ready to get a new super HP/Compaq with Vista.
Dell will never get another dime from us.
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|Yeah and don't sell your Dell. If you call them to ask to switch the customer information associated with the system, you will receive a big NO.
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|I had the same problem. A few years ago I gave an old Dell to a relative, but to get support from Dell she has to pretend to be me because Del will not transfer the ownership details. That's a stupid system.
Apparently Dell believes a PC is for life, not just for Christmas.
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|maybe criminals acted like customers first to try and exploit dell, now they are preventing it.
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|read the eula and terms of service included with the dell warrenty... non transferable. just like a microsoft oem license.
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|Thats cause Dell is thinking in terms of a corporate. They don't want people keeping their older pcs, it's bad for business. Besides I don't know about you but I really don't have time to read every EULA I see, though I probably should.
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|ont the contrary, dell doesnt care what pc's you keep. they just dont want to have to support them after so long.
as far as not having time to read the eula, thats your fault if you dont. although not needed for somethings, its retarded if people were provided with the information, and didnt read it cause they are lazy, then complain about something covered in said information.
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