Michael Dell says: If I could do it all again...

Dell operates a build-to-order model for its direct customers and non-retail channel partners. The retail partner manufacturing operation is different, being a build-to-inventory model. Marmonti disagreed with the the suggestion that having two different manufacturing models added to Dell's costs, saying the supply chain had been tuned for build-to-order over many years. Marmonti said Dell's build-to-order manufacturing was a competitive advantage. He didn't say so, but build-to-order could be more expensive on a unit cost than build-to-inventory.

Dell has in-house factories and also uses contract manufacturing. Neither Michael Dell nor Marmonti would discuss specifics of factory closures, nor of moving manufacturing to lower cost countries. It is likely that contract manufacturing could grow as a proportion of Dell manufacturing, as Michael Dell said: "That wouldn't be a surprise." The possible corollary of in-house manufacturing reductions and/or transitions to lower-cost countries wasn't mentioned.

Dell and sub-netbooks

Michael Dell doesn't think that netbooks (cf Asus Eee PC) are a fantastic opportunity: "I don't think Netbooks will be a massive driver." He doesn't have a good idea about the ratio of netbook sales to laptop and desktop PCs but it's enough to stay in the netbook business: "I think it's hard to say. We've introduced a product. Additional ones will be coming."

What about sub-netbook products? "I think you'll see smaller and smaller screen devices from Dell. We've already seen nine inches. There is an opportunity for lots of disruption in that space."

Dell used to sell the Axim personal digital assistant from 2002 to 2007. There have been rumours about a Dell games console and a smart phone, perhaps using Google's Android software, but nothing substantial. Any Dell device in the PDA/smart phone area would be a me-too product, unless it were seen to offer exceptional value and or features compared to existing products from Rim, Apple, Nokia, Samsung and others.

What next?

Dell is a huge and high-quality company, unique in many, many ways. Michael Dell has had to come back from the chairman's role to sit once again in the driving seat of the business he founded. Asked what advice he would give the young Michael if he were starting out now, he said you must nurture and develop talent. Ah, the regret implicit in this, with echoes of Kevin Rollins, the previous Dell CEO who left in January 2007.

Dell is a company in transition and between two stools. No other computer hardware company has, as far as we know, made the transition from being 100 per cent direct to being balanced between direct online and telesales on the one hand and a spectrum of channel partners and retail outlets on the other.

It is suffering. Business results in Europe suffered because of a tactical PC pricing move and business is being affected by the looming recession. Is Dell just a more accurate economic thermometer than other IT suppliers, or is it more exposed because its manufacturing costs are higher than they need be and its service revenues less than they could be?

We can't say. What we can say is that Michael Dell and his company are so tightly entwined that they'll succeed or fail together. There is another looming problem of course. After the current business fire-fighting is sorted there is the issue of who will become the next Dell CEO, a nurtured insider or an external hire? That's a whole new question. ®