Downturn Derails Dell's Turnaround

Cost-cutting kills off plans for flashy new product lines
By Rob Quinn,  Newser Staff
Posted Nov 28, 2008 8:17 AM CST
Dell CEO Michael Dell shows off the Latitude XT tablet at Oracle World Conference in San Francisco, Wednesday, Nov. 14, 2007. Dell's plans for new gadgets have been shelved due to weak PC sales.   (AP Photo/Paul Sakuma)
camera-icon View 2 more images

(Newser) – Shifting consumer demand and the sagging economy spell trouble for Dell's turnaround strategy, the Wall Street Journal reports. Founder Michael Dell had been making progress since returning to the company last year with a two-pronged rescue plan, but weak sales mean his goals of cutting costs at the low end of the PC market while developing high-end gadgets are starting to conflict.

The tight margins in the computer trade make cash for developing new products scarce at the best of times and with PC prices sinking, Dell has had to shelve plans to build "brand lust" with lines of cell phones and music players. The company is scrambling to shift production from localized US facilities to cheaper plants in Asia, but its decision to embrace retail sales may undercut its more profitable direct-sales market.