|To reach $80 billion in revenue in four years, Dell is bulking up on PDAs (above), printers and flat-screen TVs.
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From PCs to PDAs
Instead, the No. 1 personal computer maker will push its ever-broadening portfolio of products like printers, PDAs and flat-screen TVs. Dell wants to hit $80 billion in revenue in four years, up 60% over last year’s revenue, by bulking up those businesses. Its core PC and laptop business represented more than half of Dell’s sales last year.
The direct marketer, which enjoyed success years ago with its “Dell dude” campaign, once again will trundle out a comic character to push its wares. This time it's Davis Davis, a Dr. Phil-like personality who tells people which Dell product can solve their problems, according to executives familiar with the campaign from Omnicom Group’s DDB Worldwide, Chicago.
Dell’s successful direct-to-consumer model and efficient manufacturing platform make it a serious contender in other categories. But it faces stiff challenges in taking on established players, whether it’s Hewlett Packard in printers or Sony in consumer electronics.
'Powerful' brand name
“Dell has a powerful brand name that resonates in people’s minds,” said Mark Lanyon, an analyst at the research firm Morningstar. But “when they push beyond their expertise in PCs ... there are other people who are just as good and have a strong brand name.”
Dell declined to comment. DDB also declined comment. The campaign is expected to break later this year. Spending couldn’t be determined. Dell spent $756.2 million on advertising in 2004, up nearly 13%, according to Advertising Age’s Leading National Advertisers report. Of that, 83% was in measured media.
Last week, Dell reported weaker-than-expected total revenue for its second quarter, largely due to below-average selling prices in several of its businesses. To counter the lower prices, Dell sold more PCs than its rivals, boosting PC shipments by 23% while the overall market grew only 14.8%, according to Gartner research.
A sliver of its revenues
Products outside of the PC line represent a sliver of the company’s revenue so far. Storage and peripherals -- which includes products like flat-screen TVs -- comprised about $5 billion of Dell’s revenue during the fiscal year ended January. But they will be more important as the company strives to hit $80 billion in revenue in four years.
Mr. Lanyon estimates this basket will hit about $10 billion if Dell is to make its four-year plan. That would make it more than 12% of revenue vs. the current 10%. The other pieces “need to keep growing quickly for a period of time to be a major part of Dell’s business.”
Tough challenge ahead
Dell has proved itself a savvy marketer in establishing dominance in the PC world. It’s also had success in servers and storage gear. While still small, its printer business shows promise. But it has its work cut out for it as it goes into consumer electronics, where it faces established players from Sony to Samsung to Apple. Indeed, Dell is making its foray even as Sony overhauls its ad efforts and challenges Apple’s iPod with Sony:Connect.
Also, Dell needs to persuade consumers to buy TVs directly from the company rather than going to, say, Best Buy. Dell has to "instruct consumers on a new way to buy these devices,” said Michael Gartenberg, director of research at Jupiter Research. “It needs to evangelize the market much the way it did when selling PCs.”