August 12, 2005

Lenovo Predicted Dell's Revenue Miss: Lessons for SMBs

At a recent meeting I had with executives from Lenovo they said that Dell was pricing themselves too low and Dell regretted it.

Selling very, very cheap computers is of course desirable for we consumers, but if a vendor keeps pushing the price down on whatever they sell, forcing others to also keep their prices down, eventually prices will keep going so low that the vendor may price themselves out of business.

The Lenovo executive's predication appears to be coming true for Dell to some degree.

Business Week writes Chief Executive Kevin Rollins said the revenue shortfall resulted from U.S. consumers who stuck with cheap, low-end desktops and laptops instead of upgrading to pricier, more profitable models.

"We can sell systems at $299 and $399, but we don't want to," he said. "We just misexecuted and didn't get the upsell in the consumer business that we normally get. That just got away from us. We stumbled there but we'll get that back in line."

Is this VERY serious for Dell. No. Their sales will continue to increase as they sell good and low cost computers, however, how low can they go and be competitive.

Compare this with Lenovo's more business focus in selling premium ThinkPads to mainly business customers.

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