Balance of Price and Function Is Key to Making Dell a Coveted Tablet Brand

Why mimicking Apple won’t help

PR-speak is often incoherent and self-aggrandizing, but it’s only sometimes completely delusional. Dell (NASDAQ:DELL) Chief Commercial Officer Steve Felice went for the gusto in a Friday interview with Reuters, though.

While discussing Dell’s plans to take on the tablet market this year — which includes taking on Apple’s (NASDAQ:AAPL) indomitable iPad with a selection of tablets using Microsoft’s (NASDAQ:MSFT) Windows 8 operating system — Felice said, “[We] think we are a coveted brand.

Bad news, Steve: Dell hasn’t been a coveted brand in 10 years or more. The only reason a college student might be happy when a parent says “Dude, you’re getting a Dell!” is that it might save a hundred bucks that would otherwise have been spent on an iPad. Dell’s brand is about as coveted as Glad trash bags — it’s a brand that means utility, not status.

Reshaping an identity

Things are going okay for Dell in 2012, but not great. Shares are up around 20% since December, and while shares are still cheap, Wall Street analysts are bullish on the company thanks to the steady earning power of its enterprise businesses — Dell’s storage solutions for businesses pull in about $500 million per quarter — and belief that the PC business will turn around. They aren’t as hopeful about the company’s tablet plans. If Dell is going to take on Apple and get both businesses and consumers buying its Windows tablets ,though, it needs to be a coveted brand.

And there’s a way to make that happen.

Dell cannot try to mimic Apple in an attempt to transform its brand. Making a high-end designer tablet will simply fail, no matter how powerful the device is or how attractive its integration of Windows 8. Motorola (NYSE:MMI) tried it with the Xoom, Hewlett-Packard (NYSE:HPQ) tried it with TouchPad, and Research in Motion (NASDAQ:RIMM) tried it with the PlayBook. All of them failed miserably because consumers made it clear that if they were going to spend $500 on a shiny new tablet, it was going to be spent on an iPad.

Dell needs to follow Amazon’s (NASDAQ:AMZN) lead and aim for low price first to capture consumer attention. The Kindle Fire snagged 14% of the tablet market in just six weeks on shelves in 2011, and did it by hitting a $200 price point.

Crafting a new angle on what consumers want

Unlike Amazon’s Kindle Fire, though, Dell’s tablets need to be competent work tools. Felice also said in his interview, “We are predominantly a company that has a great eye on the commercial customer who also wants to be a consumer.” He’s right. Dell survives as a PC business because its enterprise services are complimented by businesses that also equip employees with Dell goods.

If Dell can make a Windows tablet that costs less than $300, undercutting the iPad by a full $200, and that device has as robust a set of security and device-management features as its laptops, Dell will have an incredibly desirable machine on its hands. There’s a sweet spot between utility and cost that will truly transform Dell into a coveted brand, at least in the tablet market.

Dell is already chasing high-end customers with its new XPS 13 Ultrabook laptop. That $995 device will struggle in the market, though, when Apple’s popular MacBook Air laptops retail for the exact same price. It shouldn’t play the same game with its tablet business later this year. If Dell can nail that mix of low cost and functionality, then its resurgent hardware business will indeed give Wall Street analysts reason to be bullish on the company.

As of this writing, Anthony John Agnello did not own a position in any of the stocks named here. Follow him on Twitter at @ajohnagnello and become a fan of InvestorPlace on Facebook.



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