Dell: Dude, What Did You Do With Your Cell Phone?
So, uh, wasn’t Dell (DELL) supposed to be working on a cell phone?
Well, that was the scuttlebutt. But Dell has failed to show at recent mobile trade shows. Shaw Wu, an analyst at Kaufman Bros., asserts in a research note today that the company’s first attempt was basically rejected by the carriers as too, well, Dell-like.
He asserts that Dell showed a prototype to the carriers, but that they weren’t all that impressed. “From our conversation with supply chain and industry sources, it appears that it ultimately came down to lack of carrier interest and small subsidies, making it difficult for Dell to make a profit,” he write. “In our view, the last thing Dell needs is to enter another money losing business as it seeks to preserve its operating margins of 5%-6%.” (Which he notes compares to Hewlett-Packard at around 11%, and Apple and IBM at 15%.)
Wu says that he understands that Dell built prototypes using both Windows Mobile and Android, but that the carriers knocked the offerings for “lack of differentiation” versus current and coming products from HTC, Samsung, LG, Nokia, Motorola and others. He adds that the unveiling of the Palm Pre didn’t help, “generating interest from carriers as a viable competitor.”
That said, Wu writes that his sources believe Dell has not given up, and that “Dell remains committed to the cell phone space as it appreciates the opportunity in smart phones and the longer-term cannibalization potential of PCs.” He adds that “at the end of the day…PC vendors may have an advantage over traditional cell phone competitors as a smart phone is more PC than cell phone with all the computer functionality and voice as a commodity.” Wu notes that PC makers Acer, Asustek and Lenovo are all beefing up their smart phone offerings.
Wu reports that Dell is “going back to the drawing board is designing a cell phone with more differentiation,” that will “likely involve vertical integration of some sort including software and/or services.” And he adds that “Dell is contemplating making acquisitions to help in this effort.”
Hmmm…thinking out loud here…why isn’t Dell bidding for Palm, which has a brand-spankin’ new OS and a soon-to-be launched handset with the Pre that are getting good reviews, is capital constrained, and which has a market cap under $1 billion? Dell, on the other hand, has plenty of cash, an apparent desire to sell mobile phones, good connections with corporate IT departments, and at the same time can’t get the attention of carriers because the phones it came up with are too dull. Seems like a match made in heaven.
Dell today is up 35 cents, or 3.5%, to $10.39.
source
Well, that was the scuttlebutt. But Dell has failed to show at recent mobile trade shows. Shaw Wu, an analyst at Kaufman Bros., asserts in a research note today that the company’s first attempt was basically rejected by the carriers as too, well, Dell-like.
He asserts that Dell showed a prototype to the carriers, but that they weren’t all that impressed. “From our conversation with supply chain and industry sources, it appears that it ultimately came down to lack of carrier interest and small subsidies, making it difficult for Dell to make a profit,” he write. “In our view, the last thing Dell needs is to enter another money losing business as it seeks to preserve its operating margins of 5%-6%.” (Which he notes compares to Hewlett-Packard at around 11%, and Apple and IBM at 15%.)
Wu says that he understands that Dell built prototypes using both Windows Mobile and Android, but that the carriers knocked the offerings for “lack of differentiation” versus current and coming products from HTC, Samsung, LG, Nokia, Motorola and others. He adds that the unveiling of the Palm Pre didn’t help, “generating interest from carriers as a viable competitor.”
That said, Wu writes that his sources believe Dell has not given up, and that “Dell remains committed to the cell phone space as it appreciates the opportunity in smart phones and the longer-term cannibalization potential of PCs.” He adds that “at the end of the day…PC vendors may have an advantage over traditional cell phone competitors as a smart phone is more PC than cell phone with all the computer functionality and voice as a commodity.” Wu notes that PC makers Acer, Asustek and Lenovo are all beefing up their smart phone offerings.
Wu reports that Dell is “going back to the drawing board is designing a cell phone with more differentiation,” that will “likely involve vertical integration of some sort including software and/or services.” And he adds that “Dell is contemplating making acquisitions to help in this effort.”
Hmmm…thinking out loud here…why isn’t Dell bidding for Palm, which has a brand-spankin’ new OS and a soon-to-be launched handset with the Pre that are getting good reviews, is capital constrained, and which has a market cap under $1 billion? Dell, on the other hand, has plenty of cash, an apparent desire to sell mobile phones, good connections with corporate IT departments, and at the same time can’t get the attention of carriers because the phones it came up with are too dull. Seems like a match made in heaven.
Dell today is up 35 cents, or 3.5%, to $10.39.
source
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