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Michael Dell Returns to CEO Role at Dell
Posted by samzenpus on Thursday February 01, @04:13AM
from the hey-dude-you're-back-at-dell dept.
Businesses IT
head_dunce writes "It looks like Michael Dell is jumping back into the big
chair at Dell because his company is slipping under the direction of Kevin
Rollins. I wonder if they should be looking outside the company for new ideas,
or if going back to basics is what needs to be done?"
----|>
"Joking aside, how things have turned around hey? Although to be fair to
Dell..."
Want to be fair? Let's take another look at the Dell business model, shall we?
The industry works according to many 'rules', one of which is the 80/20
citation, saying between two parties, for every dollar transacted at the end,
one party will get 80% and the other 20%.
As an example, let's say HP sells a monitor, that is actually manufactured by
Samsung. HP knows it will garner approx. 80% of every dollar transacted on the
final sale. One monitor sold, at a retail price of USD100.00, which Samsung
charged HP $50 for, means a profit of USD$50.00. HP knows that after all
expenses are paid, they will net 80%, or USD $40.00 out of that USD$50.00.
Samsung knows that after all expenses are paid on their end, they will net
USD$10.00 (20% out of that USD$50.00 profit on the back).
As an investor, you typically assume that if you buy HP stock, they will work
to maintain that 80% - same with Samsung being expected to negotiate their 20%.
If you learned that HP was settling for 70% and letting Samsung get away with
30%, you might be less inclined to invest in HP and start throwing money into
Samsung instead, right? And if that kept up, it would just be a matter of time
before HP went out of business, as it rightly should, under such circumstances.
Dell, on the other hand, ignores the gentleman's agreed 80/20 and pushes for as
much more as they can get...90/10, anyone? 95/5? 100/0...? Been there, seen
that.
Substitute Dell for HP in the above, and then consider...what happens? Dell is
a GREAT company and investors love the ROI. Samsung, on the other hand, needs
to tread lightly - perhaps it can afford to participate at 90/10 for a short
time, hoping that Dell will eventually back off and both sides can move towards
a profit balance, but if Samsung continues and doesn't pay attention, it soon
starts to collapse. Can't pay bills or negotiate decent contracts with
suppliers...investors start walking away. Samsung dies because Dell hollowed
them out.
This is the Dell model. Hollow out your suppliers and when one dies, move to
another. Scorched earth 21st century style. Nice for Dell, right? Not in the
long run, because the day will come when there are either no more suppliers to
kill, or no supplier will do business with them. Both of those have happened,
and that is where we are today.
Dell is dead, period, as we know it. Maybe Micheal should consider selling
sugared water :) I'd rather he stayed away from business altogether.