It’s All About the Margins, Dell

Oh Dell, we love your cheap prices, but are they worth struggling for? Yesterday, the Nasdaq market closed with Dell shares dropping a whopping 5.4% after closing at $14.43. Dell continues to struggle with balancing growth and profitability.

Brian Gladden Dell’s Chief Financial Officer, said the quarter was positive because Dell “saw solid growth return”. However, the company was also “disappointed” by its profit margins. Profit margins, meaning they are pricing their pcs at an extremely low price. Currently, the Optiplex 760 desktop has a list price of $966, but is on sale for $699. Even servers are being discounted. Many companies that used to use no-name servers are now switching to Dell servers because they are a name brand and have comparable prices. Dell, I think you need to re-assess your pricing structure here.

Since Michael Dell has returned back in 2007, Dell still has not made much of a comeback. Dell tried entering retail sales, expanding its business services and improving their PC appeal to consumer. Unfortunately, Dell hasn’t been able to boost its profit to HP’s level.

Dell is #3 now in the market, no longer providing the best customer service or producing the most reliable computers. Apparently, analysts believe Dell is lost. Their business model is not working well in 2010 and needs to be changed.