Opinion on  Dell Inc (DELL)     Sector: Technology  >  Industry: Computer Hardware
Dell Lenovo Acer Scramble For Relevancy

Dell (NASDAQGS:DELL) continues to stumble along and there is no sign of their return to world beater status. Lenovo (LNVGY.PK) and ACER (2353.TW) have exchanged the number 3 and number 4 positions.

While the respective press releases will spin the relative merits of the position changes the Asian boardrooms cannot be happy. They are not interested in lower tier status.

Everyone is showing up on everyone else's home turf with a cheap product designed to inflict financial pain first and meet end user requirements second.

If Dell continues to fail at crafting a compelling reason for continued investment watch for either Lenovo or Acer to take-over Dell. Enormous synergies and stopping the pain of hyper competitive price competition will make a great deal of sense for all involved.

Dell's stock is not really catching fire and the jury is still out on too many issues. Watch Dell's cash generation (if you can guess at the numbers). As cash generation slows panic will set in and the vultures will circle.

Dell (DELL) is done in so many ways you may now stick a fork in it. On an operating point of view the entire color gambit is a bust. The entire color strategy really showed that Dell is out of good ideas. Computers leverage productivity and improve our lives on either a personal or work basis. The color on the casing is near irrelevant. Dell announces a huge marketing move to emphasize color. Essentially they announced to the world that they no longer understood their own product.

But wait. Dell even messed up the color strategy. They are experiencing ridiculous delivery and execution problems and are disappointing end users because promised colors are not available. In the 21st century in an era of choice buyers cannot get what they want.

The color debacle is a corporate metaphor indicating they are lost in the forest and cannot find their way out.

Regulatory problems continue. The financial statements are not to be relied on. Recent filings with the SEC indicate serious problems are more the norm than an isolated mistake. No one is sure if senior officers can escape the legal fall out. could Dell survive losing Michael Dell

Where is the value in Dell. HP (HPQ) is eating their lunch, breakfast, dinner and all the appetizers. In that grey world of strategic thinking the question is "What should Dell do next" If Michael Dell just wants to fight it out that becomes an ego play and the PE valuations on ego plays usually fall apart.

Is the board thinking strategically and planning for the future. Are they at least having a quiet unofficial meeting to voice concerns. They need to make a deal with someone and change for the future. The future is about ideas. Dell is fresh out. Emergency succession planning may require an emergency deal. Shareholder value is usually lost in an emergency.

Dell (DELL) announced an interesting deal with Gome to enter the Chinese domestic market through what is most likely the largest retailer in China. Well that sounds pretty good. Chinese sales of computers are expected to grow rapidly whereas US sales are very slow. So China sounds very good. Right place and right time are very important.

The Chinese electronics consumer is beginning to become sophisticated as various offerings compete against each other. OH OH. Here is the problem. Dell lost its stature because other PC offerings had better features. Head to head toe to toe consumers who had choices increasingly moved away from Dell to HP (HPQ) and others.

Yes they will get some sales in a market that is becoming increasingly prosperous. But if they do not have the goods the Chinese consumer will also come to the same conclusion. Dell is probably looking at India to tap into someone big for the same reasons. Indian consumers will also be relatively informed and therefor sophisticated.

If Dell cannot crank up the quality of their offering and learn to match or surpass HP and others then the Gomes deal will just serve to highlight more problems for Dell. They will just get there faster.