|
NEW YORK—Michael
Dell gave himself until August to prove he can rescue
his personal-computer company by selling machines
through retailers. Shoppers at Wal-Mart Stores Inc.
aren’t buying it.
Hewlett-Packard Co. and Sony Corp. are crowding out Dell
Inc. computers at chains including Wal-Mart and Staples
Inc., said Cowen & Co. analyst Louis Miscioscia in New
York, who has had a “neutral’’ recommendation on the
shares and an “outperform’’ assessment of
Hewlett-Packard since August 2006.
One year
after Dell’s return as chief executive officer, the
turnaround he promised remains elusive. Dell, down 14
percent since January 2007, costs 13 times estimated
profit, almost as much as Hewlett-Packard, which became
the biggest PC maker in 2006. Dell will fall further
behind with sales growth of 6.7 percent this year,
compared with Hewlett-Packard’s 10 percent, according to
analysts’ average estimates.
“Dell is
competing with one arm behind its back,’’ said Walter
Price, a portfolio manager who helps oversee $3 billion
at RCM Capital Management in San Francisco and has been
buying Hewlett-Packard. “Dell doesn’t have the broad
product lineup of H-P. Dell doesn’t have the deep
relationships with their partners that H-P has, and
Dell’s effort in retail is unsophisticated.’’
While
two-thirds of analysts surveyed by Bloomberg suggest
buying Dell, 85 percent of those following Palo Alto,
California-based Hewlett-Packard recommend purchasing
the stock.
The
second-largest PC maker, whose stock is down 15 percent
this year and rose 29 cents to $20.77 late Wednesday,
may post 12-percent sales growth when it reports
earnings Thursday after US markets close. Analysts, on
average, predict $16.2 billion in revenue for the fourth
quarter ended February 1. Profit probably rose 8.1
percent to $784.9 million, according to a Bloomberg
survey.
Dell,
43, has remodeled his Round Rock, Texas-based company’s
direct-only sales strategy, attempting to fight
Hewlett-Packard in retail outlets worldwide. Starting
with Wal-Mart in June, he put Dell machines in 10,000
stores in the world’s 10 largest markets in six months.
“I think
18 months is a good timeline to think about,’’ Dell told
Business Week in February 2007, when asked how long it
would take to revive the company.
It’s
been a struggle since then. Hewlett-Packard, the top
seller of PCs for six-straight quarters, is in 110,000
stores. Dell doesn’t have enough models on display to
satisfy shoppers looking to weigh their options,
Miscioscia said.
He said
Dell had only three models at Best Buy Co. stores he
visited and Wal-Mart displayed Dell’s computers “under
glass in a cage, locked down tight.’’
Dell is
building momentum as its partnerships expand, spokesman
Bob Kaufman said in an e-mail. The company tailors
offerings at Best Buy, Staples and Wal-Mart to customer
needs. “Our goal is to deliver the right technology
solution in specific retail environments rather than
having products and technology get stale on store
shelves.’’
At a
Staples in Vauxhall, New Jersey, two Dell laptops were
on display while the store had five Hewlett-Packard
models.
Efforts
to court consumers with colors including Ruby Red,
Espresso and Flamingo Pink may not be working.
Marie
Thibault chose a black Fujitsu Siemens laptop over Dell
at Tesco Plc outside London in Borehamwood,
Hertfordshire. “I don’t like the aggressive silver color
of the Dell,’’ the 20-year-old au pair said. “It looks a
bit too flashy.’’
Among
Dell’s repeat customers, Eric Rauch, a 29-year-old New
York lawyer, got used to the lower prices Dell offered
online. He owns two of the company’s PCs and browsed a
Best Buy in Manhattan before deciding not to shop in the
store. “I can usually weasel a better price out of them
on the phone.’’
Hewlett-Packard remained the top-selling notebook among
resellers last month, said Bill Fearnley Jr., an analyst
with FTN Midwest Securities in Boston whose team
surveyed almost 70 outlets that sell Dell PCs.
Since
January, Dell has made inroads against Acer Inc. and its
Gateway brand, said Fearnley. He advises investors to
hold Dell and buy Hewlett-Packard, and owns neither.
“We are
expecting Dell to make some traction,’’ Fearnley said.
“For all that effort and investment though, how many
sales are beyond what they would have had through
direct-only?’’
Dell’s
global market share fell to 14.9 percent in 2007 from
16.6 percent, while Hewlett-Packard, Acer, Toshiba Corp.
and Lenovo Group Ltd. gained, according to researcher
IDC in
Framingham,
Massachusetts.
Dell’s shipments grew 2.3 percent, while competitors
advanced 27.5-percent combined.
Some
shareholders haven’t given up. Baltimore-based T. Rowe
Price Associates Inc. added 16.7 million Dell shares
last quarter, increasing its stake 36 percent to 63.3
million, according to data compiled by Bloomberg.
“We are
making the bet that a couple of years out, Dell can
return to industry-level growth and industry-level
profitability,’’ T. Rowe analyst Chirag Vasavada said.
Michael
Dell may face questions about his strategy in April,
when the company holds its first analyst meeting in
three years in Round Rock.
“Retail
is very complicated,’’ portfolio manager Price said. “It
may be easy for a name brand like Dell to get shelf
space, but it’s still hard to make money.’’ (Bloomberg) |
