May 11

Dell’s convenient story

Laptops = billions ... but that was 3 years ago

As Apple will attest, journalists can be your best buddies or your worst nightmare.

Sometimes they buy your story hook, line and sinker. Other times they smell blood and turn into pirhana.

But Apple’s situation is unique. They have to deal with a media frenzy, no matter what they do.

What about Dell? How likely is the press to run the story Dell wants them to run?

Apparently, pretty likely. Recently, Michael Dell gave an interview to the Wall Street Journal, in which he downplayed the importance of consumer sales and up-played Dell’s efforts in the enterprise. This is the way he spun it:

Two-thirds of Dell’s profit is not the PC. Of the one-third that is the PC, the vast majority of that is not consumer. I’m just level-setting what Dell is today, because I think a lot of people look at Dell and they go, “Oh, Dell is a consumer PC company.” That’s not really at all what Dell is today.

Michael must be taking Distortion Field training, because news services and blogs played back his positive spin almost verbatim, with headlines like Michael Dell Looks Beyond PC Business and Don’t Confuse Dell For A PC Maker.

This is what I call a “free ride.” It’s true that Dell makes a lot more money in the business world than they do in the consumer world. But there are two reasons for that: the business side is going up and the consumer side is going down.

The story swept under the carpet is that Dell, who once inspired individuals with its renegade approach, is now playing out a prolonged death scene with consumers.

The headline “Don’t Confuse Dell For A PC Maker” actually gets it right — just not in the sense the author intended. PC makers should have a sense of imagination and an ability to inspire their customers. Dell can no longer be confused with such a company.

When it turned into a commodity manufacturer, echoing the innovations of others and surviving on handouts from Intel and Microsoft, Dell lost its ability to connect on an emotional level. Now they connect only with companies who buy technology by the pound.

Apple’s customers are loyal because they get hooked on innovation, design and quality. Dell tells us that value is king — so their customers only hang around until they see a better value somewhere else.

So despite the way the press covers the story, the real story is that Dell is doing two things at once: growing and shrinking.

That’s why Michael Dell is out there talking about the enterprise. That’s also why the percentage of Dell’s business from consumers will continue to drop — and will keep dropping until “Dell sells off consumer division” becomes the subject of a future WSJ interview.

Update 5/17: Right on cue, Dell reported today that in the last quarter, PC sales were down 8%. Shocker.

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