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Mainstream press goes down on Dell

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Not even processor superstar AMD could rescue Dell last week.

Abuse for the Titan of Texas flew in from all sides after it posted second quarter results so lackluster that they could almost be confused with a Sun Microsystems earnings report - almost. How bad was Dell's quarter? Well, CNET managed the headline "Dented Dell Gwana Gwana," while the New York Times had this to say…

Speaking from China to Wall Street analysts in a conference call after the earnings announcement, Michael S. Dell, the company’s founder and chairman, said, “We are not satisfied with our performance, and we will do better.”

While the company has told analysts for more than a year that it will do better, it has not been able to follow through. In a changing market, Dell has been unable to gain traction against competitors as it has in the past, when it has cut prices to gain market share.

In a separate story, the Times veered toward the absurd.

You would have thought, in view of the week's events, that Michael Dell would show up at a greet-the-folks gathering here Friday looking like some whiter shade of pale.

Not a bit: Appearing in a packed hotel ballroom during a brief stopover, the founder and chairman of the computer maker Dell seemed to glow a sort of sun-drenched pink as he defended his company and his actions.

Such harsh words from a pair of publications known more for their liberal use of "zippy" and "great" than "dented," "unable" and "pink."

In May, Dell tried to distract analysts and reporters from a poor first quarter by announcing a partnership with AMD. You could tell the AMD thing was a distraction because Dell won't have the four-socket Opteron servers it hyped then ready until the fourth quarter. The deal served its purpose though as critics gave Dell credit for making the types of changes needed to revive its business.

Following last week's second quarter debacle, Dell announced another deal with AMD for a two-socket Opteron server that won't ship until the end of the year either. Another distraction for another bad quarter. At this point, AMD has to be praying for a third quarter Dell bomb. That could result in a massive fleet of Opteron gear.

Dell's denial

Dell's fall is made all the more amazing because of the company's history of getting things right. Dell spent the pre-boom years growing its business at an astonishing rate and then kept growing at a torrid pace post bubble, while all of its major competitors struggled.

Much of Dell's success has stemmed from the way it can enter new markets, apply its direct model and grow revenue at double-digits in these new markets every quarter. Dell employed such a strategy in the server market, and did great.

But the company's dependence on Intel has proved a disaster over the past year. In the first quarter, Dell's server growth slowed to 3 per cent, and in the second quarter it dropped down to 1 per cent growth.

Let's put those figures in perspective for a moment. During its previous fiscal year, Dell's server revenue grew per quarter at 12 per cent, 9 per cent, 16 per cent and 10 per cent. It straddled double-digits the whole way back then, only to end last quarter near zero growth.

Dell's management has yet to cop to this drop in a proper fashion. The company's undying love for Intel's co-marketing dollars cost it on a massive scale. HP, Sun Microsystems and IBM all have a huge lead with Opteron customers, while Dell has been left to pick up the scraps.

And rather than correct the problem as it should have, Dell first decided to use Opteron only on high-end, four-socket systems. One quarter later it realized that wasn't such a crash hot choice and announced the two-socket box. There's some serious denial going on in Round Rock, since everyone on the planet - Dell's customers included - told the company it was making a huge Intel-only mistake.

We'd like to see CEO Rollins or Chairman Dell admit to the company's server gaffes if for no other reason than to assure us that they still have some hold on reality.

Enough Dell bashing - cough - let's move on to the new Opterons.

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