06th Feb 2013
Some context setting is in order before we discuss the week's biggest news technology-business news, that of Dell going private.
The last few years have not been good for large consumer technology companies, other than those in the mobile space. Japanese electronics giants who defined the space are in trouble. Sony has been posting losses for about two years now, and Panasonic is not in too good shape (the company recently announced it would shift its focus away from consumer electronics and on to other businesses). The story is not different for Philips (the company which invented the audio cassette), which is exiting the consumer electronics market by selling off parts of the company to a Japanese company called Funai Electric Co., after posting steep losses. Another recent example of a large technology company letting go of the B2C market is that of Cisco, which sold its home networking division, Linksys, to competitor Belkin.
Clearly, something is amiss in the consumer technology space, where we are seeing more number products being manufactured and consumed, but many large manufacturers are losing interest. With greater number of product categories becoming rapidly commoditized, there are many players who produce essentially the same hardware for lower prices. The inevitable result is of shrinking margins, leading some of the larger companies to question the sustenance of their B2C businesses.
Now let’s talk about Dell, in the context of the above market scenario. Doing things unconventionally is nothing new to the company. And doing things unconventionally is the cure for a market that is stagnant because everybody is doing everything, and in similar ways. Dell going private gives it the flexibility to do business differently, think of different product lines and bring them out quickly to the market.
Dell Does Unconventional: The company, which is now Dell, started when Michael Dell, its founder, started building computers and selling them via mail order at prices lower than rest of the market, in 1984. He was still in college at that time, and soon enough, dropped out to focus full time on selling computers. In the early days of the company (late 1980s to mid-1990s), the company thrived on a direct sales model which it perfected, allowing users to place an order online or via phone, giving them a fair degree of flexibility in configuration (something that other manufacturers caught on to later). Those who have been following the consumer IT industry would agree that the company does not hesitate to experiment. From the Alienware lineup (after they acquired Alienware, of course) to the Dell Streak (at a time when the likes of the Galaxy Note did not exist) to the Adamo laptop (one of the few worthy competitors to the Macbooks at its time), Dell has tried something something different, something bold.
Dell buying back its shares and going private still does not mean Michael Dell can wrest full control (Microsoft and Salt Lake partners are involved in financing the buy back of the company’s shares). However, it should still give the company more agility and decision making powers without the immediate pressures from shareholders. A bolder, less inhibited Dell that borrows from its roots may just lead to some action happen in an otherwise stagnant market.
Side note: Dell, a major contributor to and benefiter of the PC boom, played its part in the commoditization of PCs. In an irony of sorts, it is this very commoditization that caused Dell to lose some of its sheen, starting mid-2000s.
What Ails Consumer Tech And Why The Dell Deal Is A Welcome Change | TechTree.com
What Ails Consumer Tech And Why The Dell Deal Is A Welcome Change
Dell going back to being a private company (as opposed to a listed company) may be the shot in the arm that the consumer tech market needs. Here's why.
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