Thursday 18 July 2013

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Wall paper for computer earnings and sales continued to rise, sales growth slowed considerably, and the company stock lost 25% of its value that year.[25] By June 2006, the stock traded around $25 USD which was 40% down from July 2005—the high-water mark of the company in the post-dotcom era.[26][27]
The slowing sales growth has been attributed to the maturing PC market, which constituted 66% of Dell's sales, and analysts suggested that Dell needed to make inroads into non-PC businesses segments such as storage, services and servers. Dell's price advantage was tied to its ultra-lean manufacturing for desktop PCs,[28] however this became less important as savings became harder to find inside the company's supply chain, and as competitors such as Hewlett-Packard and Acer made their PC manufacturing operations more efficient. Throughout the entire PC industry, declines in prices along with commensurate increases in performance meant that Dell had fewer opportunities to upsell to their customers (a lucrative strategy of encouraging buyers to upgrade the processor or memory). As a result the company was selling a greater proportion of inexpensive PCs than before, which eroded profit margins.[21] The laptop segment had become the fastest growing of the PC market, but Dell produced low-cost notebooks in China like other PC manufacturers which eliminated Dell's manufacturing cost advantages.[26]) CNET has suggested that Dell was getting trapped in the increasing commoditization of high volume low margin computers, which prevented it from offering more exciting devices that consumers demanded.[28]There has also been a decline in consumers purchasing PCs through the Web or on the phone, as increasing numbers were visiting consumer electronics retail stores to try out the devices first.[29] The lack of a retail presence stymied Dell's attempts to offer consumer electronics such as flat-panel TVs and MP3 players.[28]had a reputation as a company that relied upon supply chain efficiencies to sell established technologies at low prices, instead of being an innovator.[29] By the mid-2000s many analysts were looking to innovating companies as the next source of growth in the technology sector. Dell's low spending on R&D relative to its revenue (compared to IBM, Hewlett Packard, and Apple Inc.)—which worked well in the commoditized PC market—prevented it from making inroads into more lucrative segments, such as MP3 players.[25] Increasing spending on R&D would have cut into the operating margins that the company emphasized.[5]Dell's reputation for poor customer service, since 2002, which was exacerbated as it moved call centres offshore and as its growth outstripped its technical support infrastructure, came under increasing scrutiny on the Web. The original Dell model was known for high customer satisfaction when PCs sold for thousands but by the 2000s, the company could not justify that level of service when computers in the same lineup sold for hundreds. By 2006, Dell had spent $100 million in just a few months to improve on this, and rolled out DellConnect to answer customer inquiries more quickly.There was also criticism that Dell used faulty components for its PCs.[30] A battery recall in August 2006, as a result of a Dell laptop catching fire caused much negative attention for the company though later, Sony was found responsible for the faulty batteries.
2006 marked the first year that Dell's growth was slower than the PC industry as a whole. By the fourth quarter of 2006, Dell lost its title of the largest PC manufacturer to rival Hewlett Packard whose Personal Systems Group was invigorated thanks to a restructuring initiated by their CEO Mark Hurd.[25][31] [32]
After four out of five quarterly earnings reports were below expectations, Rollins resigned on January 31, 2007 and founder Michael Dell assumed the role of CEO again.


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