With apologies to the rockers at R.E.M., it's the end of Dell
Quoting from his comments at a meeting with analysts, held in Austin earlier today:
Our environment has dramatically changed, particularly in the last five years. The direct model and competitive supply chain was the right approach at the time. But we have to evolve our model because our competitive environment is changing.
What Cannon could mean is that fellow Stock Advisor selection Apple
Retail: Apple beats both Best Buy
and Circuit City (NYSE: BBY) in sales per square foot at its 180-plus retail stores. Having them as a try-before-you-buy demo lab for new iPods and iPhones has been a boon to sales. (NYSE: CC)
- Contract manufacturing: For years, Apple has maintained relationships with Asian suppliers to build its products, cutting costs by outsourcing its supply chain.
Dell has been toying with retail for some time thanks to a deal with Wal-Mart
Many including Cannon -- until recently. Quoting once more:
A typical desktop program for Dell can have over half a million different configurations. Why did we do that? Because we could. But now, if customers don't need that, we've got to go rip that cost out.
Translation: We're going to simplify the product line and outsource some manufacturing. So, yeah, we like what Apple's doing.
Don't look at me that way. Rumors of Dell imitating Apple have been flying for months, if not years. And for good reason. Dell hired Ron Garriques away from Motorola
Cut to run
There's more than Apple envy at work here, though. Dell says it will be more aggressive with job and cost cuts. Roughly 8,800 employees will get pink slips. Some of them may have already -- a manufacturing plant in Austin was shut down earlier this week. All told, executives expect to cut $3 billion in annual operating costs.
No doubt that'll help. Sales were up 10% in the fourth quarter, but operating margin slipped to 4.8%. Inventory was up more than 78%. And Hewlett-Packard
And after that, what's next, Mike? When Dell is a lower-cost version of Apple, with fewer products, a limited R&D budget, a decent retail presence, and a vastly diminished build-to-order business, isn't it just ... Gateway?
There's more to Steve than the black turtleneck, Mike.