I keep telling Dell (Nasdaq: DELL) to lose the consumer division. Eventually, the company will simply have to listen.
Another quarter is in the books, and once again, Dell's various lines of business-ready systems showed strong growth and profits while the consumer side of things dragged the company down. In the end, nearly flat growth in the low-margin retail segment led to lower-than-expected sales but higher earnings, which sounds like a trade-off any business manager would enjoy.
The small-business, enterprise-business, and public-contracts divisions all delivered 20% year-over-year sales growth or more, and their operating margins hovered around the 10% mark. What did consumer systems do? Try 4% sales growth and break-even income. And that's actually an improvement over prior quarters, partly thanks to efforts to consolidate Dell's sprawling lineup of consumer-level systems into just three product lines.
At last count, Dell had $1.3 billion of assets tied up in the consumer division, and it's dead money that doesn't generate any profits for the company. I still believe that Dell would be better off unloading the whole mess to one of its many rivals in order to unlock some value from the operation. Dell says it wants to lose the value-priced stigma it has in the consumer business today and refocus on higher margins and a stronger business, and what better way to do that than by unloading this perennial underperformer to Hewlett-Packard (NYSE: HPQ) -- antitrust reviews permitting -- or Lenovo? Those are the guys eating Dell's lunch anyway, in cahoots with Mac maker Apple (Nasdaq: AAPL), which now commands more than 10% of the U.S. computer market share despite its premium pricing.
Dell is repeating this mantra about listening to its customers, but they're vociferous about not really wanting the retail systems Dell's selling -- and they sure don't want to pay more for them. Get back to business computing 101, guys.
Send Michael Dell a message by dropping down to the comments section below and telling him how right I am. You know you want to.
