Sarah Shields, Dell's consumer GM for UK and Ireland, identifies some serious problems facing the market...

Dell Interview

Where Dell seems to be doing best is the corporate arena, as well as through ‘high margin products’ such as servers. From a consumer perspective, what product categories are performing best for Dell right now?

Let’s be really honest with each other here. The consumer market is soft. The consumer market is really soft. And this is a global phenomenon – we had our Q1 results that came out and although our consumer business was three billion dollars, it was in seven per cent decline. And that’s purely down to the fact that the demand just isn’t there. I don’t think there has been a better time to buy computers than right now – we are seeing some of the most amazing price points out there. You can get so much technology for your pound.

But people are holding back. They’re holding back because of inflation, because of uncertainty. Although in the Consumer Confidence Index I did read something that said because of the Royal Wedding it was its highest ever, but I think that’s just because they’re happy not necessarily confident.

Times [in the consumer market] are tough. And I think that what we’ve done, we’re we’ve been successful, we’re not in this race for zero. There’s no fun at the bottom of the market. It’s an absolute bloodbath. We are much more interested in giving customers exactly what they want. The right technology for the right price. And just the bargain basement deal of the day.

There’s so much old technology floating around at the moment, and I don’t want to buy old stuff with my money even if it is cheap. I want the latest, I want something that going to give me enjoyable ownership for three plus years. Not something that’s already out of date when I buy it.

Do you think there’s a problem in the market with ‘old technology’ being circulated?

I think it’s a huge problem. If you look at GfK and IDC figures for last year, there was a massive surplus as we came into 2011. And that’s all old technology. The UK market was in a dreadful state in calendar Q1. January sales and into February – it was pretty horrific. And we saw it in the retailer results. We see it in the results of every big player in this market. It hasn’t been a boom quarter at all. You only have to look at the sort of products that are out there at the moment, you’ve got IT at crazy prices – but its all old technology. And it has to sell through, absolutely. But I’m in the extremely fortunate position that we’ve actually managed our inventory very well. So I don’t have to sell the old stock, I can still give the consumer exactly what they want.

Acer is having to pay something around $150 million to clear such stock, it was reported last month. Are we likely to see more of that?

I don’t want to comment on Acer’s problem, but it’s by no means unique. You just have to look at the GFK and IDC figures to see how much stock has been hanging around. I think it’s affected everybody. I don’t know if one company has been hit more than another I don’t want to speculate on that, but all I can say is that it has been tough. And the survivors here will be the ones that have kept a very careful control of their inventory. Who have sold in what they sold out. It works best for the manufacturer, it works best for the retailers.

During the ‘Bernstein strategic decisions conference’ last month, Michael Dell said that the firm’s shift away from personal computers and into services is paying off. Is it getting harder to make money on traditional PCs today?

Absolutely. Because of the consumerisation of IT, you have to look at other revenue streams. You have to become more solutions led. And as a consumer you kind of expect it as well. As a consumer, it becomes part of my decision making process.

In lieu of all these new devices on the market today, are we approaching an era where the PC is less relevant?

Do you know what, I don’t think its less relevant. But I think you have more companion devices to go with it. I my personal life I have a smartphone, I have a tablet, and I have a notebook. I then at home have my home PC which has all of my photos, its attached to my TV, and acts as my home server. Those are things – and it’s a sad thing to admit to – that I can’t live without. And the fact that they all talk to each other has become absolutely the way I manage my household.

It’s incredible, so I think that you digitalise your life, but what you don’t do is take away the importance of your PC. They way that I look at it, and it wasn’t me that came up with this – you’ve got the three Cs. Communications, consumption and creation. Communication is my smartphone, consumption is my tablet, and then creation is my PC. With the best will in the worlds, you aren’t going to do spreadsheets and PowerPoint on a tablet, it drives you nuts.

What about tablets – how big can this market become? At the moment Apple are dominating it – can they be challenged in this area, and how big a player can Dell be?

My view is that there’s more than one player in any market. And the market is always going to need points of difference. Apple is a closed eco-system. And I’m not going to say anything negative about it at all, however there are people out there that prefer Android. If you look at Android in the smartphone arena, it’s growing exceptionally well.

The number of apps available, the number of followers, the way it has been designed, its going to get bigger and bigger. And there are some people out there that will want to go with an Apple, and there are others that will want to go with an Android. And its up to the players in the Android market to look at adding more value to the consumer offering. Looking at ways that it’s not just an alternative, but so that it does a bit more. We came out with a five-inch pocket tablet.

It’s got all the functionality of a pocket tablet, but it actually fits in your pocket. And some people love it, some people hate it. But then some people love the iPad, some people hate the iPad. We have one in our house – my husband is a massive fan. I also have an android tablet, and I’m a massive fan. So it’s all about choice. But I must admit if my toddler wants to play with a tablet I’ll give him the iPad first.

Would you agree that if you’re not Apple, it’s very difficult to differentiate yourself in this market? Since the devices are 95 per cent screen they all look alike and almost all operate the same Android operating system, which makes the operations pretty similar as well. How are manufacturers supposed to stand out in this market?

I think you’re absolutely right, that’s going to be a constant challenge for everybody. And it’s nothing new – it was the same with netbooks. How do you differentiate a netbook? It’s going to be an interesting one to see how it pans out.

You’ve got three or four big players coming out with hardware, its going to be about what can you do not just with hardware, not just Android, how can you get something that adds a little bit more value. For Dell, that goes back to this Stage thing that I’ve been talking about. That is how we differentiate; it’s about managing the content. Getting content that you actually want, that your going to use and need on a daily basis.

And another point, and this is one that every manufacturer is looking at, is the quality of the product. You are walking around with a screen. You need to work out how you can make that as robust as you possibly can.

I think it’s going to be an interface that ties the android and hardware system together – and that’s not proprietary. If it’s a closed eco-system, I question whether or not it adds more value than is already available.

You mentioned the problem of swamps of old tech flooding the PC market, is there a danger this could happen with tablets?

I don’t know – if your not careful it could. Because there has been some big developments in the tablet arena, and if you have got excess inventory out there with the new developments that are coming out it’s going to be obsolete very, very quickly. So again it goes back to inventory control. It’s more important what you sell out than what you sell in. You’ve got to balance it.

Dell is more invested than most in the infrastructure of cloud computing. Is this a phenomenon restricted to the business world, or can it be successfully pushed out to consumers as well, as many top tier firms seem committed to doing?

I think cloud computing is perfect for consumers. The idea of having all your content on a server farm somewhere so you can go show your picture of your kids – my sister-in law is in new Zealand she can look at it, I can share data, I can share everything. I think that’s wonderful. If you’ve got kids as well its really good because theatre not going to have sensitive data on their laptops, you have the controls around what they’re pulling because it’s based on the cloud.

I love the idea of Snapdragon type devices where you’ve got instant on, access the cloud, s you don’t have a hard drive. You’ve got this beautiful, thin light screen plus keyboard, which takes up just the same amount of room as a tablet, but you’ve got that functionality. You’ve got that creation as well as consumption. I think its fantastic, bring it on. I love it, and yeah we get to sell a few more servers as well, brilliant!

I think the opportunity for the consumer is absolutely there.

Do you agree security has become a PR issue for the cloud? Will be the main difficulties in selling it?

I think there are security measures out there that are perfectly adequate, perfectly ok to manage this one. But you have to be just as diligent with your information kept in the cloud as you do your anti-virus on your PC. I think it’s exactly the same protocol, there’s no difference at all. That’s one of the ways that the actual cloud providers will differentiate themselves.

So in the future, do you think its possible no one really have hard drives or store anything themselves? Will everything just be on server farms around the world?

Do you know what, I was having this conversation a couple of days ago with one of my good friends. I’ve got all of my pictures on my PC, yet I still love my photo album. So I would physically pick up and flick through my pictures. I think as human beings we will always want to have something locally as well. I don’t think its going to completely replace it, I think people will always crave to have that precious data close at hand. That’s my personal thought.

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