Dell Finally Focuses on Core Competitive Advantage (DELL, HPQ, GTW, BBY, CC)

by: David Jackson

Excerpt from our One Page Annotated Wall Street Journal Summary (receive it by email every morning by signing up here):

Dell to Reduce Promotions In Pricing Overhaul

  • Summary: Dell announced that it would simplify its pricing by cutting the numbers of promotions and rebates offered on a single-product-basis by 80% over the next 18 months, starting with Inspiron notebooks and flat screen TVs in August and extending to Dimension desktops. Electronics retailers have moved away from mail-in rebates in favor of "instant savings" at the store. Dell's share of the US PC market fell to 30% in Q1 from 32% a year earlier.
  • Comment on related stocks/ETFs: Dell's competitive advantage lies in its greater efficiency and cost advantage over HP. Confusing customers with complex pricing is thus the dumbest thing Dell can do. Instead, it should offer straight prices that consistently undercut the competition. This development is therefore incrementally positive for Dell's stock (NASDAQ:DELL), possibly more so than the market will give it credit for, and incrementally negative for HP (NYSE:HPQ), Gateway (GTW) and the retailers who carry their products, Best Buy (NYSE:BBY) and Circuit City (NYSE:CC). Dell's stock fell to a new 52 week low yesterday. For an overview of the debate between the bulls and bears on the stock, read this summary with links, and articles by Eddy Elfenbein and Dah Hui Lau.