Dell may go beyond price cuts for growth

SAN FRANCISCO: How much lower can Dell go to grow? Dell Inc became the world’s largest personal computer company by selling PCs for less than competitors. But low prices are no longer enough in a market of falling PC prices, and now Dell has to find other ways to stoke its ailing growth, analysts said.

Among the options: scaling back the direct-sales business model that fuelled the company’s rapid growth beginning in 1984, when founder Michael Dell started selling made-to-order computers from his University of Texas dormitory room.

Dell may have to buy a rival or aggressively expand beyond PCs and sell more printers, televisions and services, analysts said. But in those markets, too, competition is fierce, and the company historically has avoided large acquisitions.

“The competition has gotten more competitive,” said Loren Loverde, an analyst at market researcher IDC. “Dell has essentially chosen not to ramp up their competitiveness in step. I would suggest that part of it is a lack of focus.”

Dell acknowledges that price cuts alone cannot revive growth, and it is building up its printer and notebook businesses as well as investing more in customer service, spokesman Jess Blackburn said.

“Price alone is not as great a differentiator as it was four to five years ago,” Blackburn said. “Our competitors have improved, and in a sense learned from us.”

But Dell has no plans to change its direct-sales model, he added, and Dell continues to use price as a lever to win market share. A year ago, it acknowledged lowering prices too aggressively, then promoted higher-priced machines and now says it is cutting prices once again to revive growth.
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