November 14, 2005

Dell Can't Reach US$80 Billion

In April Dell predicted it would reach US$80 billion in sales within three to four years. However, very recently, this prediction was amended and given no time table. Why? Dell, as a Lenovo executive shared with analysists at a recent meeting, has priced itself too low.

It's great to have low prices, but if you keep lowering prices and don't leave room for profit then there's a serious problem as customers will keep demanding you go lower and lower in prices.

This is a lesson for the computer industry and for all businesses as well. Don't price yourself out of a market. Also, leave room to compete on issues other than price, such as quality, speed, customer service and etc.

Bloomberg writes Rollins's decision to drop his time frame of ``within three to four years'' set in April underscores the speed with which Dell's fortunes have changed. Dell, which for the past three years has generated sales growth averaging 18 percent a quarter, yesterday reported third-quarter gains of 11 percent, the sixth straight period of slowing growth.

``Their failure to reiterate the timeframe for that guidance today clearly suggests a notably lower growth rate than they had anticipated seven months ago,'' Sanford C. Bernstein & Co. analyst Toni Sacconaghi said yesterday in an interview.

Dell forecast 9 percent to 11 percent growth this period.

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