Traders punished Dell stock this week after the Texas computer giant announced that a tough pricing environment would impact earnings. Dell does need to restablish its reputation in the consumer and small business markets, where its once sterling reputation for service has been tarnished, eroding brand premium in highly price sensitive markets. In addition, while Dell has spruced up its offerings compared to the vanilla corporate boxes it sold a few years ago, the products don’t evoke the excitement of differentiation of products from Apple, and they no longer enjoy the service premium against HP and others.
With the cost advantages of the Dell model, if Dell is being forced to price too low, they are not building what people truly want and/or have conditioned customers to buy on promotions. While no one is suggesting that Dell is going the way of Ford and GM, they do seem to be grappling with their own inertia. The most important thing they can do, as judged by Wall Street, is to get a better grip on pricing. I bet they have at least a few tens of millions of wasted promotional spending that would do more good on the bottom line.