If at once you don't succeed, try and fail again.
Dell (Nasdaq: DELL ) is apparently ready to take another beating in the portable music player market, according to this morning's Wall Street Journal. The company has been testing a new player in recent months that may hit the market as soon as this quarter.
If the name Dell DJ and Dell Ditty don't ring a bell, you're not alone. The company's brief dive into this market was a disaster, and the company bowed out two summers ago. At the time, Dell was disappointed to nab just a 3% slice of the nascent digital music market. How is it going to feel when slices will be harder to come by in a mature market?
Why does Dell want in? What are its competitive advantages? I can whip out a laundry list to answer the first question, but does it even matter if the second question prompts shrugged shoulders?
Just exactly what would Dell's core competencies be in rolling out a hip media player and a digital music storefront ecosystem? Dell has apparently inked the licensing agreements with music service providers and will work with movie studios for eye candy content, but what gives Dell the right to dream out loud?
Even slivers would be ambitious
Dell doesn't need to vanquish Apple (Nasdaq: AAPL ) to matter here, but can it even compete with the smaller players? SanDisk (Nasdaq: SNDK ) has a huge advantage in flash memory production. Microsoft (Nasdaq: MSFT ) has the Xbox 360 fan boys to market to. Creative Labs has been cranking out peripherals since before Michael Dell enrolled at the University of Texas.
Those are some healthy advantages, but how were those companies faring against the iPod earlier this year?
|
1st Quarter 2008
|
Market Share
|
|
Apple iPod
|
71%
|
|
Sandisk
|
11%
|
|
Zune
|
4%
|
|
Creative
|
2%
|
Source: NPD Group
The fact that a cash-rich heavy like Microsoft has pumped a ton of money into marketing two different incarnations of its fledgling Zune, only to sell just two million units and land a pathetic 4% of the market is a flare worth heeding.
The fact that iPod sales have slowed lately at Apple -- up just 1% year-over-year two quarters ago before rebounding to a still weak 11% year-over-year advance this time around -- is not a dinner bell. It's a cruel splash of reality when even the design kings of Cupertino are having a tricky time moving their wares, and spooking the market by pointing to lower gross margins in the near-term. With iPhone and BlackBerry users tapping directly into music services, maybe the preferred medium has changed.
Oh no, is Dell going to have to settle for a thinning slice of a thinning pie?
Consumer, where art thou?
What in blazes is Dell thinking? It's not as if we can say that Dell is such a cool brand in the consumer space. Dell is still an enterprise staple, leaving the electronics superstore free for Apple and Hewlett-Packard (NYSE: HPQ ) to duke it out for shelf space. There's a reason why the "you're getting a Dell, dude" dude was replaced with lowly office workers in the direct seller's televised marketing materials. This is still more a tie than a tie-dye company.
Yes, Dell made a splash for diehard gamers when it snapped up high-end gaming computer maker Alienware two years ago, but that is no match for Microsoft's Xbox minions. Even with Microsoft's raging street cred among the diehard gaming community, GameStop (NYSE: GME ) still decided to clear its inventory of cobweb-collecting Zune players earlier this year.
In other words, this is more of a cutthroat environment than the personal computing space that Dell actually understands. Its advantages there don't translate into digital music, or else HP printers would be playing Van Halen by now. Even an electronics giant like Sony (NYSE: SNE ) that pioneered the portable music niche during the golden days of the cassette-winding Walkman proved to be a flop here.
Dell is either a glutton for punishment or somehow banged its head on a rock and suffered insomnia from 2003 to 2006 when its first player crashed and burned. No matter what Dell's sorry excuse, I just hope it doesn't blow through too much money in its second attempt to jab at Apple's windmills.
Prove me wrong, Dell.
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