All Things Digital

What would I do? I’d shut it down and give the money back to the shareholders.”

– Michael Dell on what he would do if he were CEO of Apple (AAPL), circa 1997

When Dell (DELL) missed Wall Street’s profit expectations last week, the company’s leadership spoke little about its plans to improve profitability, saying only that there is “much more work to do.” Well, turns out that “much more work to do” is actually a euphemism for “we still have to sell off our factories to contract manufacturers.” Faced with falling margins, Dell is hoping to cut costs by selling sell most–if not all–of its plants within the next 18 months. Why? From The Wall Street Journal:

Dell’s plants are still regarded as efficient at churning out desktop PCs. But within the industry, company-owned factories aren’t considered the least expensive way to produce laptops, which have been the main driver of growth lately and are complex and labor-intensive to assemble. Rivals such as Hewlett-Packard Co. years ago shifted to contract manufacturers–H-P builds less than half of its PCs in facilities it owns.”

Interesting. So Dell’s factories, while “efficient,” are expensive. Or rather, they’re more expensive to run than those run by foreign contract manufacturers whose operations are laser-focused on finding “efficiencies in manufacturing,” i.e., employee wages.

I guess if you’ve already outsourced your tech support to India, you might as well outsource your manufacturing to China, right?

Windows Vista may end up being the least-desired best-selling OS in the history of operating systems. New research suggests that more than one in three new Vista PCs is downgraded to Windows XP. Performance and metrics researcher Devil Mountain Software reports that its survey of over 3,000 Vista PCs revealed nearly 35 percent to be running XP. “Either these machines were downgraded by [sellers like] Dell (DELL) or HP (HPQ), or they were downgraded by the user after they got the machine,” Devil Mountain CTO Craig Barth told ComputerWorld. “In any case, these machines are no longer running Vista.”

An interesting data point to consider in light of Microsoft (MSFT) chairman Bill Gates’s claim earlier this year that sales of Windows Vista had reached 140 million copies worldwide. If Devil Mountain’s figures are accurate, Vista’s installed base is likely quite a bit less than that. That revelation is a humbling blow for Microsoft, which has been doing its damnedest to convince consumers that Vista is an OS worth running.

Cloud computing providers need not worry about finding an alternative buzzword to describe their services. The U.S. Patent and Trademark Office has refused Dell (DELL) a trademark on the phrase “cloud computing.” Though Dell had been given preliminary notice in July that it could have the trademark, the USPTO seems to have thought better of that decision. “… The applied-for mark merely describes a feature and characteristic of applicant’s services,” the Office explained in its “non-final” refusal of Dell’s application. “In addition to being merely descriptive, the applied-for mark appears to be generic in connection with the identified services and, therefore, incapable of functioning as a source-identifier for applicant’s services.”

And that’s a conclusion that makes perfect sense, as cloud computing consultant Sam Johnston notes. Said Johnston, “… Few of us think ‘Dell’ when we think of ‘cloud computing’, even in this context.”

It’s interesting the iPod has been out for three years and it’s only this past year it’s become a raging success. Well, those things that become fads rage, and then they drop off. When I was growing up there was a product made by Sony called the Sony Walkman–a rage, everyone had to have one. Well, you don’t hear about the Walkman anymore. I believe that one-product wonders come and go. You have to have sustainable business models, sustainable strategy.”

– In 2005, former Dell Chief Executive Kevin Rollins utters the words he would dine on a short while later

A glutton for punishment, Dell. Though its foray into the MP3 player market was about as ill-starred as they come (remember DJ Ditty (mascot at right)? Yeah, didn’t think so.), the company is gearing up for a second attempt. Unfazed by its Ditty disaster, Dell (DELL) has reportedly developed a second, ahem, “iPod killer.” Designed to connect to online music services via a Wi-Fi Internet connection, the device will use software developed at Zing, a company Dell acquired last year, to retrieve and organize digital media. The device will sell for less than $100 when it arrives at market in September.

Dell’s first MP3 player lasted three years before the company scuttled it. That was back in 2006, when Apple’s iPod was somewhat less ubiquitous than it is now. How long will its second player last in a market that’s 71 percent-controlled by Apple (AAPL) and dripping in iPod branding? History would seem to suggest not long at all, though Microsoft’s (MSFT) maligned Zune music player has managed to stick around for a few years. Perhaps Dell can steal a point or two of market share from its sad, little four percent. All aboard the FAIL-boat. …

John Locke (played by Terry O’Quinn) and his Apple II in ABC’s “Lost”

“Because they’re the super-small-market share guy, they get all these statements about them.” Microsoft (MSFT) Chairman Bill Gates said that about Apple back in 2005. And while it’s essentially still true, it’s less so than it has been in years past. In separate reports today, research houses Gartner (IT) and IDC (IDC) both note that Apple has climbed to third place in the desktop market in the U.S. Gartner figures Apple’s share of state-side PC shipments for the second quarter of 2008 to be 8.5 percent, up from 6.4 percent in the quarter a year earlier. IDC pegs it at 7.8 percent for the second quarter this year, up from 6.2 percent in last year’s second quarter. And that puts the company in third place in the domestic PC market–ahead of Acer, if you believe Gartner. And in fourth place behind Acer if you believe IDC.

Not that it matters all that much. Because regardless of whose metrics you prefer, Apple (AAPL) still lags far behind the two PC sales leaders. Dell (DELL) is still the No. 1 seller of PCs in the U.S., with 32 percent of the market according to IDC. HP is No. 2, with 25 percent. And in terms of worldwide sales, Apple hasn’t even cracked the Top 5. Yet.

It’s definitely No. 1 in Hollywood though, as critic Roger Ebert noted a few years back. “Macs turn up in the movies all the time–not so much because of product placement, but because so many movie people use them and like them,” Ebert wrote. “A historian of the future, counting all the on-screen computers between 1983 and today, would likely conclude that Macs represented 90 percent of the computer market.”

So apparently Dell’s (DELL) laptops are “the world’s most secure” in the same way that SNL’s Tommy Flanagan is the world’s most eligible bachelor.

The National Advertising Division of the Council of Better Business Bureaus, which monitors truth in advertising, didn’t find enough of it in Dell’s claim that it makes the “World’s Most Secure Commercial Laptops.” Tipped off to Dell’s “world’s most secure” advertising campaign by rival Lenovo (LNVGY), NAD examined Dell’s claims and determined it to have a few too many unnecessary superlatives.

NAD noted that while the PC maker’s machines were indeed secure, “claims suggesting Dell notebook computers are the ‘world’s most secure’ were not supported by the evidence in the record.”

The world’s most secure laptops … Yeah.. that’s the ticket! Yeah, you betcha …

Valiantly soldiering on in its quest to buy the search market share it has been unable to attain on the strength of its own technology, Microsoft (MSFT) this morning announced an alliance with Hewlett-Packard (HPQ) that will give its Live Search service a very broad beachhead in the PC market.

The deal calls for a Silverlight-powered Live Search toolbar be installed on all HP consumer PCs shipping in the U.S. and Canada beginning in January. Come next year, Live Search, not Yahoo (ouch), will be the default search-engine setting in the browser on HP PCs. “This agreement with HP is a strategic indicator of our increased focus on securing broad-scale distribution for Live Search,”Kevin Johnson, president of Microsoft’s Platforms & Services Division said in a statement. “This is the most significant distribution deal for Live Search that Microsoft has ever done.”

Microsoft wouldn’t say how much it’s paying HP for access to its vast customer base, but a similar deal between Google (GOOG) and Dell (DELL) was rumored to have cost the search sovereign nearly $1 billion over three year. Chances are Microsoft’s looking at fees around that order of magnitude with this HP deal. That said, now that the Yahoo (YHOO) acqusition has fallen through, the company’s got more money to spend on this sort of thing. Said Search Engine Land’s Danny Sullivan, “Given the billions it was prepared to spend on acquiring Yahoo, I’d assume it’s willing to pay much more for distribution these days.”

This year’s D conference had its share of great lines–tired ones, too (we’re all clear on the subject of Facebook and information sharing, right?). Here’s a selection of the former…

Guys like us avoid monopolies. We like to compete.”

–Microsoft (MSFT) Chairman Bill Gates

AOL is the Rodney Dangerfield of the Web. We don’t get no respect.”

–Jeff Bewkes, president and CEO, Time Warner (TWX)

I will probably never be a CEO again.”

–Yahoo (YHOO) CEO Jerry Yang states the obvious

It’s a company that creates technology.”

–Facebook CEO Mark Zuckerberg answers the question, “What is a technology company?”

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