Analysis: Dell reinventing itself, but support issues linger

IDG News Service - Dell's efforts to reinvent itself this year through a dramatic break from its direct-sales model, expanded services and new enterprise offerings have shown positive early results, but some users have lingering concerns about the company's supply-chain management and support.

Weathering an accounting scandal and a slump in profit, founder Michael Dell reclaimed the helm of the company after CEO Kevin Rollins resigned in January. Dell quickly replaced top managers and in May announced plans to lay off 10% of the company's workforce.

For years, Dell was the top PC vendor in the world, an acknowledged master of logistics in a business where margins can be razor-thin. It was efficient enough to keep prices low to ward off competition without suffering big setbacks in profits. But by 2006, when Hewlett-Packard unseated Dell as global PC leader, that was no longer the case.

Dell's plans to regain its former dominance have resounded in the market. The company's third-quarter results, announced two weeks ago, showed profit increasing year over year, and record revenue of US$15.65 billion. During the company's earnings call, Michael Dell said the company will put products on more retail shelves worldwide while also helping business customers "simplify IT" and reduce maintenance costs via customized hardware, software and services.

The company has also moved to put accounting issues behind it, recently completing an internal investigation and restating its financial results from fiscal 2003 to the first quarter of 2007.

The company has been making an effort to build relationships with customers and partners and deliver products that are easier to deploy and manage, said Charles King, principal analyst at Pund-IT.

Last month, Dell introduced a two-tier channel program designed to give partners better access to Dell's training, marketing, certification and online resources. The program will provide a better chance for Dell to interact and understand its partners' needs, the company said.

"The company seems to recognize that it has bridges to enhance with customers and partners in the channel. It's not something that's going to change overnight," King said.

After years of success selling PCs directly to users, the consumer business' direct-sales business model hit a wall as component prices fell, Pund-IT's King said. The strategy to simplify IT is a play at small- and medium-size business and enterprises that will help Dell deliver better returns in the long term than its lower-margin direct consumer business, analysts said.

However, some customers continue to have concerns about the company's support and supply chain issues.

Dell is having supply shortages and can't get its servers and OptiPlex desktops to individuals and small businesses in a timely manner, said Josh Kaplan, who runs a franchise of computer support firm Rescuecom and purchases parts and interacts with Dell on behalf of customers.