Dell (DELL) has done a modest amount of what it could do to keep pace with its PC competition. It recently launched a high-end laptop, the Adamo, which mimics the look of a Apple (AAPL) MacBook. It is a handsome machine, but is costly and does not have features that would seems to make it a candidate for taking business from Apple.

Dell has also moved into the rapidly expanding netbook business, but its machines do not offer anything the inexpensive machines from Asia don’t do.

Dell is even rumored to be getting into the handset business, but rumors are that no major cellular carrier wants its products.

None of this has done anything to revive the company’s fortunes.

According to MarketWatch, HP (HPQ) has moved ahead of Dell in US sales. HP already holds the distinction of being No.1 worldwide.  “H-P’s domestic market share went to 27.6% from 23.8% in the same period last year. Dell’s share went to 26.3% from 30.4% during the same period.” To make matters more dire, Dell is losing market share while global PC sales are contracting. In the first quarter, total sales for the industry dropped 7.1%.

And, Dell is not just being pressure by its larger rival. The company in third place globally is also gaining ground. Acer’s global market share rose from 10.1% to 11.6%.

Micheal Dell, the company’s founder, returned as CEO early 2007. He promised to reverse the firm’s flagging fortunes. Instead, Dell’s situation has worsened and the hallmarks of his tenure have been layoffs and cost cutting.

The most damning criticism of Dell is that it is unable to build PCs that businesses and the public want. That is difficult. PCs have common processors and use most of the same software, primarily Microsoft (MSFT) Windows. Building distinguished products involves a bit of alchemy. Apple has been able to do that, while Dell has not. At the same time, Dell is unlikely to have the advantage of being the low-cost provider. Acer is more likely to hold that position.

Because Dell’s PCs are considered commonplace, it does have to attempt to compete on price. That compresses margins and makes net income growth extremely difficult.

If Dell cannot begin to produce PCs that make it a clear choice over its competitors because of product design or retail pricing, it will continue to lose market share. That will be the legacy that Michael Dell will leave from his second turn at running the company.

Douglas A. McIntyre

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