Dell's Cell Phone Strategy: Off To A Fizzling Start

Posted by: Peter Burrows on August 17, 2009

Over the past two years, Dell Inc. has been working on an expanded consumer strategy, but wisely wanted to keep quiet until it had its story just right. After all, Dell was humiliated by Apple in the MP3 player market (remember the Dell DJ and Ditty?) and by an unsucessful foray into the TV business earlier this decade. To prove it was a serious player, it couldn’t afford another miss, my sources told me. Executives admitted they needed a great re-launch, with something far more inspiring than its mostly me-too PCs. And it needed some inventive idea to show how it would make money, versus reams of entrenched rivals, from Old Guard cellphone makers to Apple Inc.

dell phone.jpg

Which makes the first appearance of a new Dell consumer product such a disappointment. Rather than a splashy, well-orchestrated unveiling of its own, the small, touchscreen-based device, called the mini3i, was included in an announcement by China Mobile, the gigantic Chinese carrier. Although there’s scant information about the device, what is known is hardly winning rave reviews. For example, the device doesn’t support WiFi or 3G networks, but will only work on so-called 2G networks—the kind of basic pipes we all used when cell phones were only for making phone calls.

A Dell spokesman says the device is just a “proof of concept mobile device prototype,” rather than a real product. But words like “proof-of-concept” and “prototype” usually imply cool and cutting-edge. Unless Dell has found a way to pump applications and other services from China Mobile’s just announced Mobile Store over those pokey 2G networks, it’s hard to see why such a phone would stand out.

All of which raises still more doubts about Dell’s ability to expand its consumer reach. After all, the company has been at it for a few years now. The company signalled its intentions when it hired former Motorola cell phone chief Ron Garriques and former Nike designer Ed Boyd. It was Garriques that championed Dell’s purchase of Zing Systems two years ago, and crafted an ambitious strategy to use its digital media software to provide a platform so dozens of devices and popular Net music and video services could work with each other. The goal was to put Dell at the center of a new open ecosystem, that would provide real competition to Apple’s iTunes. As Michael Dell put it in an interview for that story, “We think we have a vision that will provide an attractive alternative to the single device and single service strategy that exists today.”

Evidently, that particular vision isn’t going to see the light of day. At one point, Dell had hoped to sell more than a million of a device built around Zing software, for playing streamed (as opposed to downloaded, a la iPod) music and other content, one source tells me, but that product has been killed. By this Spring, the company was trying to interest carriers—without success—in more conventional cell-phones built around Windows Mobile or Google’s Android software. Indeed, the mini3i is based on Android, suggesting Dell has retrenched to a hardware-only approach.

Instead, it seems Dell has chosen the path of least resistance rather than do something really differentiated. Fielding a cheap phone aimed at the vast, growing throng of Chinese consumers may well be the simplest way to get some scale. “They should be able to sell five million units with their eyes closed,” says former Motorola CEO Ed Zander, Garrigues’ former boss. But it’s hard to see how it will bring in the profits or improved brand position the company will likely need to get out of its funk of recent years.

TrackBack URL for this entry: http://blogs.businessweek.com/mt/mt-tb.cgi/

Reader Comments

andrew@dell

August 17, 2009 10:30 PM

It seems like there is a lot of buzz around Dell's particpation in the CMCC press event yesterday.

It's good to see continued speculation and commentary around the mobility market. Peter's commentary draws out some interesing ideas and speculation. That said, Dell didn't announce any products yesterday but instead confirmed that it will be developing mobile products for China Mobile, the world largest carrier with over 500 million subscribers.

Peter is also correct in his assumption that this is a growing and imortant market. And yes, CMCC did show a prototype but no product was unveiled or launched. Just more hopeful speculation I guess.

It's great to see the dialogue continue and we'll look forward to keeping the conversation going.


Sergei Dovgodko

August 17, 2009 10:36 PM

Dell is true to itself as a commodity player. Commodity businesses compete by taking cost out and then reducing the price to get market share. They don't compete on the coolness of their brand.

From this perspective, Dell does not need splashy differentiated design for the phone. They want it cheap and basic.

Doing in China with a basic product makes perfect sense. It coherent with the nature of the company and the the nature of the target market.

etchy

August 17, 2009 11:44 PM

keep in mind too that China basically has no 3G network right now. and I'm under the impression that China mobile has some restrictions about Wifi enabled phones too (which is one reason why the iPhone is not yet on sale too).

Prodigi

August 18, 2009 01:39 AM

This shows that the author of this article has zero knowledge about local asian businesses. 3G penetration is minimal in asia. 2G is still the dominant tech and people are still getting used to just talking on phones. iphone is a big flop here :)

Escondido

August 18, 2009 01:48 AM

"they’re" is spelled wrong. It should be "their" (in quote by former Motorola CEO Ed Zander).

AC Shanghai

August 18, 2009 01:55 AM

Those who are familiar with the mobile market in China would know that Chinese phones aren't legally allowed to have WiFi (yes, it's a Chinese law!), and that the (infant) Chinese 3G network is actually a different (home-grown in China) system than the rest of the world's 3G networks, with no more than a handful of 3G devices.

I understand that these China 3G devices are mostly from domestic phone manufacturers like Lenovo and ZTE, though I did hear that S.E. just released one not long ago. AFAIK Nokia don't even have a 3G (China) phone out yet.

Just trying to shed some light on the China situation, which the writer seems to have neglected.

This is not speculation on whether US/European/other Asian versions of this phone will be 3G or will have WiFi!

JJOhio

August 18, 2009 05:24 AM

As a consumer having purchased Dell products in the past, Dell has a lot more problems to deal with than just merely having good products available. They have to provide excellent support for those products too, and stop having practices that aren't consumer-friendly.

I correctly predicted the demise (major scaleback, or complete going out of business)of two companies (CompUSA, and Roberds) because of their consumer practices, and predict Dell will be a third if it doesn't change how it treats its customers.

Consumers don't like Dell, and they don't like the company because it treats them like crap! Is it too late for Dell to change, and become consumer friendly? That is hard to say. Will Dell change, and become consumer friendly? That is very unlikely. Because of the unlikelihood of Dell's changing, I again predict that Dell will eventually fall the way of the dinosaur: It will become extinct.

Formerly@Dell

August 18, 2009 07:09 AM

Dell has lost its way.
The intentions are good but the "not created in Austin" ideas are dismissed as costing the company greatly. Such a shame for a company that could be very versatile in what it wants to achieve. Yes some great names have joined Dell but many more have left or are leaving. Take a look at the list in the last six months - most because of a directionless company.
This phone has been in rumour for too long and a disappointing "again not from Austin" set of requirements has been dismissed. Why no WiFi? Why no 3G?? Strange to say the least.

exMotorolan

August 18, 2009 09:13 AM

Ron Garriques is a BIGGEST wuss!! He screwed up MOT before 1000 days committment and he ran away. Ron, Padmashree and fast Ed can go and **** themselves. Morons!!

Rory Marsh - Jamaica

August 18, 2009 09:32 AM

Dell is still a strong brand.

They have the right idea by getting into a relatively risk free arrangement to test their mobile phone capacity while hopefully breaking even.

I am more interested to see what Dell will launch in the Western Markets as it relates to mobile phones.

RonNY

August 18, 2009 10:17 AM

JJOhio,

If customers don't like Dell and hate the company, why are they second only to Apple in the latest customer satisfaction ratings? Apple came in at 84% and Dell second at 75%. No offense, but your personal experience with Dell does not speak for everyone. I've never had a problem with them and been a customer for 15 years both personally and for my business. Regarding this article, where is the actual phone itself? If they are claiming no 3G or WiFi, sure they have more than this stupid picture of a guy holding a phone. If your going to comment on something shouldn't you have more concrete evidence than hearsay?

kuei

August 18, 2009 10:31 AM

This is great! Now when my dell computer isn't working I can try to call dell tech support on a dell phone that probably won't be working.

jambo

August 18, 2009 03:59 PM

We live in a world of cool toys with Apple, always coming up with the coolest gadgets, with apps that actually make life easier.

Dell's mindset isn't to make products tomake your life easier, In fact, it makes life harder, because they are price driven only. You can buy it cheap, but you get what u pay for, which isn't much, in Dell's case.

Apple's MO is to change the world with their products and their ceo is crazed and demands the most from his ppl. Meanwhile Dell's MO is to get it as cheap as possible, so they can blanket the market based on price alone. Sadly, this business model doesn't work anymore, as you an see from Dell's financial performance. Now Dell wants to be like Apple, but how can they, if their business mindset isn't like Apple's?

Seems like a colossal waste of their time and money to me.

kuei

August 18, 2009 06:37 PM

Dell could never be like apple because they have built a reputation for selling junk. People pay a premium for Apple products because they know they are getting quality. I am forced to use a dell pc at work everyday and I dread it. Businesses who choose dell to cut costs on the bottom line end up paying far greater in production costs due to poor performing pc's. We have no viruses. The pc's are just complete garbage.

gerrrg

August 18, 2009 09:29 PM

If I understood correctly from comments posted elsewhere on this phone, mainland China does not really have a 3G network, which would be a huge failure for Dell to sell a 3G device in a 2G country. If it is also correct that Dell is using Android, I think that from an earnings perspective, they are correctly targeting their phone and going down the correct product path. Do people really think WiFi is critical in a country that has a large land mass and buildings that are spread apart like typical Communist planning? I think too many people might be assigning their personal experience in the US to a nation where demographics and culture is completely different.

Ray Winter

August 19, 2009 05:37 AM

The Android Operating System is far from being commercially 'ready' and falls short when measured against others on the market. It also lacks support for many international standards so advanced telecomm services that are now available will not be accessible to Android users for a long time to come.
Ray Winter is the founder of Mazingo Limited, a Smartphone designer and manufacturer. www.mazingo.tv

ex-MOT

August 22, 2009 12:51 AM

Ron Garriques is just as good a Motorola manager as Mike Z, who went on to bankrupt Nortel. Condolences to Dell employees.

Child of God

October 28, 2009 01:35 AM

I feel that it's not gonna jump off how some people think it is. For one it looks like and iPhone and two it's a Dell. Let's see them Jack the price up for something that's not worth our money. Can't get with the iPhone just give it up. They beat you with the iPod don't get beat with the cell phone.

Post a comment

 

About

BusinessWeek writers Peter Burrows, Cliff Edwards, Olga Kharif, Aaron Ricadela, Douglas MacMillan, and Spencer Ante dig behind the headlines to analyze what’s really happening throughout the world of technology. One of the first mainstream media tech blogs, Tech Beat covers everything from tech bellwethers like Apple, Google, and Intel and emerging new leaders such as Facebook to new technologies, trends, and controversies.

Categories

 

BW Mall - Sponsored Links

Buy a link now!