Amid all the tumult in its business, Dell Computer Corp. has begun an agency review with the goal of consolidating advertising, according to people familiar with the plan. And beleaguered rival Gateway, as expected, moved its $250 million global ad account back in-house (AdAge.com, Feb. 28).
Shifting ad plays are symptomatic of bigger problems facing tech.
"It's pretty much a train wreck across the board," said Stephen Baker, VP-technology products research for PC Data, a tech research firm. The tech sector's slump is trumpeted in endless headlines and sound bites warning of slower growth and excess inventories. Unit sales of consumer desktop PCs at retail posted a 26% decline in January compared with the same period last year; notebook PCs were down 9%, according to PC Data.
Tepid sales, weak earnings and a growing lack of consumer confidence have forced some marketers, such as Gateway, to drastically overhaul their business models.
The direct seller of PCs last week announced a value-driven business model and aggressive plans to drive more traffic to its Gateway Country Stores. While the in-house ad shift signals a return to hands-on daily management by Chairman-CEO Ted Waitt, Gateway clearly is looking to save cash. A spokesman declined to comment.
"Everybody [companies, analysts] is trying to figure out how long [the slump] is going to last," Mr. Baker said, echoing other tech-industry analysts' views.
Mr. Baker said PC marketers are taking various approaches to the downturn. For example, Compaq Computer Corp. has so far resisted deeply discounting PCs, while direct sellers Gateway and Dell have taken the opposite approach. But, Mr. Baker says, "if it's going to be a long downturn, it's questionable if you can maintain lower margins" over the long-term by driving volume.
LACKING AN EDGE
Compaq and Hewlett-Packard Co. accounted for 80% of retail consumer PC sales in January, according to PC Data. Compaq commanded 45.2% of the market; HP, 39.3%; followed by eMachines with 9.5%; and Apple Computer, 2.3%. Sony Electronics' Vaio desktops racked up just 1.5%.
The once-ballyhooed efficiencies of direct PC sellers Dell, Gateway and IBM Corp. don't give them the same edge they once had, industry insiders said.
Meanwhile, Dell's review, spearheaded by Scott Helbing, VP-global brand strategy, may end up combining duties for branding, transactional advertising and media, according to people familiar with the search. Dell is leaving open an option to separate creative and media assignments.
Omnicom Group's BBDO Worldwide, New York, has had Dell's estimated $50 million global corporate branding assignment since 1998, but those duties ended several weeks ago. BBDO will not participate in the review. But as of last week, BBDO's TV and print work for Dell continued to appear. A spread promoting Dell's partnership with Microsoft Corp. and Intel Corp. appeared in The Wall Street Journal March 1 with the tagline "E-business solutions, made easy with Dell." Omnicom's OMD handles media for BBDO's portion of the account. A BBDO spokesman referred all calls to the client.
MAKING A PLAY
Interpublic Group of Cos.' Lowe Lintas & Partners, New York, handles Dell's Home and Small Business unit advertising and is believed to be making a play to win the entire account, according to people familiar with the review. A Lowe spokesman referred calls to Dell, which declined to comment.
In addition to Lowe, Dell is talking with True North Communications' Temerlin McClain, Dallas; and Omnicom's DDB Worldwide, Chicago (AA, Feb. 26). Aegis Group's Carat is pursuing Dell's media. None of the agencies would comment for this article.
The players know each other. DDB New York President John Berg was executive VP-managing director of BBDO's New York office when BBDO won Dell's branding assignment three years ago. Mr. Berg earlier worked with Dell's Mr. Helbing when Mr. Helbing worked at Pizza Hut, a BBDO client.
Meanwhile, Lowe Lintas two years ago prevailed over finalist Temerlin in the Home and Small Business review.
DDB last year split with Dell's Texas rival, Compaq Computer Corp. Lowe Lintas, through various incarnations, has handled Compaq, Sun Microsystems and IBM Corp.
Contributing: Wendy Davis and Laura Petrecca