Dell Cheating on the Direct-Sales Model? 116
capt turnpike writes "Despite its CEO saying that the direct model is the company's 'religion', according to eWEEK.com, Dell seems to be moving away from direct sales and working with value-added resellers." From the article: "Still, 'they'll never admit it or make [the channel] a formal program,' said one analyst who asked not to be identified. 'If you look at Dell's stock versus HP's, part of the difference has to do with Dell's reputation for owning the customer. There's a sense they own the entire margin and have higher profits because they sell directly. It makes them appear more valuable to Wall Street.'"
You can buy Dell stuff all over the place (Score:5, Interesting)
the future? (Score:3, Interesting)
This new "secret" channel may be their way of testing a new innovative model.
Re:Silicon Valley Business Model is Dead (Score:4, Interesting)
Where's the V in VAR? (Score:5, Interesting)
In fact, they're successful with this model precisely because they're direct channel models is so successful. With our customers, they often specifically request Dell computers and they generally know exactly how much they cost.
Check Costco for occasional big Dell discounts... (Score:5, Interesting)
Of course, no custom configurations...but the product does ship directly from Dell with Dell warranties.
For some reason, Apple seems to dump EOL equipment thru Costco too.
Re:Silicon Valley Business Model is Dead (Score:4, Interesting)
I think that you are sort of right, but only accidentally. I'm talking a little out of my zone, but I think this is right (and Investopedia seems to agree [investopedia.com].
If a company is confident that it can take a dollar of profit, invest it in its own operations, and yield a return substantially higher than an investor could by receiving that dollar as a dividend and investing it somewhere else (accouting for risk, task implications and such), the investor is better off if the company re-invests that dollar (which would ultimately lead to a more valuable company and thus capital gains). If a company is mature and/or can't generate a lot of incremental profits from re-investing that dollar, it should kick it out to the shareholders, and let them figure out how to allocate it.
So as Dell's growth slows down [yahoo.com], it's ability to generate more profit through re-investment of profits diminishes (yes, it's a lot more complicated than that). So the logic dictating retaining profits vs. paying out dividends may very well change- let's see what Dell does.
build your own (Score:1, Interesting)
I taught myself to build computers, and I look upon it like a jigsaw puzzle for 5+ year olds. It's very hard to do something wrong. And there's only one piece (usually) for one hole. (Save for the tough processor clips)
Granted building your own box still takes more time than just taking one out of the store, but it's only like an afternoon if you're even only moderately experienced. For that afternoon of light work you can save yourself a couple of hundred bucks at least.
I've made probably a couple of grand building machines for people over the past few years. Cost to me: Nothing but a few hours.
People should get smart and start building their own machines, it's far more rewarding. Apologies if this is offtopic or trolling, but it's something I believe should be more commonplace than it is.
Feeling the squeeze (Score:3, Interesting)
Anecdotally -- my employer (~90 employees) typically leases computers; at end of lease, we either buy at $1 or return if we have FMV purchase option instead on the computers. Past two years, we've not been leasing new boxes except for the art/design teams who need Macs. Instead, we've been replacing individual boxes as they go.
We're still getting Dells -- but now getting them through a VAR (Zones and/or PCMall, if you're curious). Since we're not buying 20+ PCs, it's more expensive to go through Dell than through the VARs -- and honestly, more of a PITA, since the VARs bend over backwards for us.
There are a ton of companies like mine, and Dell would be moronic to not want our business. If Dell needs to sell indirectly to get the business, they'll continue to do so.
Of note, though, we still buy our service contracts direct from Dell -- and that's where they are making a ton of cash off us. And the poor VARs aren't making anything off us except for when we buy peripherals, since the margin in the boxes is almost zero, and we're going to Dell for the service contracts.
I really don't want to sell Dell, but... (Score:3, Interesting)
My experience with Dell servers is not positive. Call it anecdotal, but I see amber lights on Dell equipment more often than on every other piece of equipment in the datacenter. This is true for Dell shops and mixed shops. This is also true where there are only maybe 2 or 3 servers from Dell in the mix of other stuff.
Motherboard failures, PERC failures etc...
When I sell an HP server, I sell something that I can trust. The truth is, however, that corporate desktops are throwaway boxes. I don't care if one of them dies and keep a spare at hand.
Re:build your own (Score:3, Interesting)
Ok, ok, my first computer was actually a Heathkit, all the parts came in bags, and there were detailed instructions and troubleshooting guides. But I know a guy who put together his own Z80 based computer just by reading the spec sheets.
Re:Can you say "System Integrators?" (Score:4, Interesting)
We used to move about $40k-$60k a year in Dell hardware (not huge, but not too bad for a small firm) and we got a whopping 3% discount. Not even close to enough money to cover my time spent jumping through the stupid hoops that Dell made us go through to be a VAR. Also, my "dedicated sales rep" treated us like crap. I mean, really bad. (He once told me "You don't move enough product to warrant my time right now. I'll call you next week when I'm not busy.") I know he probably gets six figure deals and we were peons to him, but honestly, with the way he treated us, I had no incentive to sell more of their merchandise. The $50k was only when people specifically asked for Dell hardware. Towards the end I stopped recommending it altogether, then we switched to other hardware providers. If my story is typical, then I can see whey Dell is sliding.
Re:Check Costco for occasional big Dell discounts. (Score:4, Interesting)
I just purchased an E1505 directly from dell.com . It was several hundred dollars cheaper then the comparable models at Costco.
The Dell deals really require some understanding of the Dell rebate process, and close monitoring of the different deals. It's a little sleezy. I missed a $585 off coupon the other day when it expired at 10:00:00PM Pacific Time. I missed the coupon by 30 seconds (I entered my credit card number, hit submit, and the price on the _very_last_ confirmation screen jumped by $585. Dell support also closes at 10:00PM, so I couldn't call anyone.
Costco doesn't have this headache.