Dell announced it would abandon its trademark direct-sales-only model and start selling PCs in Wal-Mart.
This is a last gasp ploy by a really screwed-up company. Dell's historical advantages were:
1) Financial engineering. Selling puts on its own stock and using aggressive accounting gave Dell a financial advantage. No more. The company is under an SEC investigation for accounting and deliquent in its filings. And selling puts doesn't work so well when the stock is going down.
2) Cutting out the retailer. By cutting out the middleman, you both capture his share of profits and shorten the supply chain, cutting time to market. No more.
3) The little-mentioned sales tax dodge. Buy a $2000 HP at Wal-Mart in California, and you'll pay around $165 in sales tax. Buy a Dell direct over the Internet, and avoid paying that tax. That amounts to a huge (if not technically legal) price advantage. That doesn't work if you're buying Dell in the same Wal-Mart as HP.
They'll now be competing, with no structural advantage, side-by-side with industry leader Hewlett-Packard, as well as low-price brands like eMachines and Everex.
Bonus reasons to hate Dell: they screw employees and shareholders. A veteran Silicon Valley manager (HP, Apple, Dell, and others) tells me that Dell is by far the worst place he's ever worked. Management is dictatorial and stupid. As for shareholders, Dell reported billions in "profits" and "cash flow" during the boom, but shareholders got none of it. Shareholder equity actually decreased as Dell used all of its supposed "profits" and "cash flow" to buy back stock to replace the billions in stock options given to Michael Dell and other executives. Michael Dell got filthy rich, and shareholders got declining book value, no dividends, and a stock that's still 50% below where it was in 1998.
Short this sick puppy.
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