Does Dell Matter Anymore?

With Dell's pricing advantage stripped away by Hewlett-Packard, Lenovo and other rivals, solution providers say Dell's direct mantra seems trite and irrelevant in the face of service and technical gaffes plaguing the vendor.

The Dell of today pales in comparison to the major competitor it was a few years ago, said Sam Haffar, president and co-CEO of Computex, a solution provider in Houston. "It used to be difficult to sell against Dell because of their price points or the ease of doing business with them. But that's not the case anymore. HP has tweaked its pricing and Dell has been marginalized. Once you strip the pricing away, what does Dell have?"

Haffar said Dell's pain is his gain. In fact, in the past 12 months he has converted eight Dell accounts in whole or part to HP because he can offer service and support that Dell can't match. He said his business grew 35 percent last year, bolstered by his ability to convert or make inroads into Dell accounts. And he's on track to grow 35 percent to 40 percent this year, fueled by his success against Dell, he added.

A Dell spokesman countered that the Round Rock, Texas-based company still remains a force in the market.

"It boils down to the fact that we provide a great customer experience and great products," said spokesman Dean Kline. "And it's the reason that we've become the leading computer provider in the world. We have the broadest portfolio of products in our history. We have made great investments across the business to make sure we are giving customers a great experience and we are continuing to improve where we can."

But another large solution provider who was recruited by a Dell channel team recently begged to differ. "Dell is a commodity company groping to find its way in a solutions market," said the executive, who asked not to be identified. "At the end of the day are they saying anything compelling? No."

A few years ago, when IBM and HP were on the ropes, Dell could have delivered a knockout blow by partnering with the channel, he said, but not now. "They were a captive of 'buy direct' and they waited too long. Whether they can recover or not, time will tell."

ORGANIZE THE CHAOS
Dell's woes are as dramatic as they are puzzling to many solution provider executives who see a quick fix to the problems. Many solution providers who for years have steeled themselves for battle against the direct vendor say that Dell's best and quickest route to new growth and profitability is to better organize its seemingly chaotic channel forays.

Dell, for its part, acknowledged its long relationships with the channel, but said any recent moves to go after new VARs don't signal a strategic shift at the company.

"We have always looked for those areas where it made sense to partner with the channel, for example government or health care," Kline said. "If you have a specific set of skills, or a particular application or a service capability in a particular location, [Dell has partnered with solution providers]. As far as the idea [of the channel] being the next great opportunity for us, I don't think you should watch for us to make any big strategic shift."

Just last month, Dell warned that for its fiscal second quarter ended Aug. 4, it expected earnings per share to be 21 cents to 23 cents, down 44 percent to 49 percent from the year-earlier period and substantially below analysts' estimates of 32 cents per share. Dell said its fiscal second-quarter revenue should reach $14 billion, up 4.3 percent from second-quarter 2005 but below analysts' expectations of $14.2 billion.

Dell blamed the shortfall on "aggressive pricing in a slowing commercial market worldwide."