Dell Inc. must be pleased that this week has come to an end. As the Associated Press reports, Dell’s woeful week included a record-setting recall of notebook batteries, the disclosure of a federal accounting probe. and a 51-percent decline in second-quarter profit.
There also was a lingering controversy over the poorly managed release of a laptop model in China that was powered by a microprocessor other than the one listed in Dell’s product literature.
In a bid to show it is getting with the program, at least belatedly, Dell announced that it would increase its use of microprocessors from AMD.
Until earlier this year, Dell had been exclusively an Intel shop. It’s first tentative stop toward AMD came when it released a four-way, Opteron-based server for high-performance technical-computing applications. Now it will embrace AMD microprocessors across the board, using them to power a range of desktop and laptop personal computers as well as for two-way servers.
Dell will start selling its consumer-oriented Dimension desktops with AMD processors next month. Other models of PCs, including notebooks, will be powered by AMD chips before the end of the year. Opteron-based servers also are expected to reach market by year’s end.
According to a report on CNET’s News.com site yesterday, quoting a report by a Bank of America market analyst, Dell has ordered between 1 million and 1.2 million AMD-powered desktop computers and about 800,000 notebooks.
Calculations by the Bank of America analyst suggest that AMD will capture about 15 percent to 16 percent of Dell’s desktop business and approximately 18 percent to 19 percent of its notebook business. That’s a lot of business, and you can be sure Intel, already in the midst of a restructuring effort, won’t be happy about it.
At least the AMD news demonstrates that Dell is trying to climb out of the gaping hole it dug for itself. Make no mistake, it is a deep hole, and Dell didn’t dig it overnight. It took a lot of misguided shoveling to produce a crater this vast, and Dell now faces a brand crisis that could hobble its image with consumers and enterprise buyers for a long time to come.
There’s no quick fix to the problems Dell faces. None of these debacles that burst into the headlines this week was a result of chance or of fate. Each one resulted from Dell’s institutionalized arrogance, neglect, and a monomaniacal preoccupation with internal processes over all else.
Shifting its mix of microprocessors more toward AMD responds to a symptom of Dell’s chronic problems, but what about diagnosing and treating the disease?
Before it can get well, Dell must admit it has a problem. The problem is one of corporate dogma and ideology. Dell’s success planted the seeds of its decline. It began to view its business-process formula — comprising direct sales, build to order PCs, and a low-cost supply chain — as an end rather than a means to an end.
It got religious about its business model — and business and religion don’t mix, unless you are a televangelist. To paraphrase the late Warren Zevon, what worked for you before might not work for you now.
At Dell, there now should be no sacred cows. Pragmatic executives, prepared to look at everything Dell does with critical detachment, are required. Can the current executive cast at Dell do that job? Are they capable of asking the tough questions and coming up with the right answers, even ones that are anathema to Dell’s previous practices?
That’s the challenge, and it will be fascinating to see whether Dell can remake itself before its decline becomes irreversible.