Dell has been losing ground in the PC market to arch-rival HP (HPQ). Asian manufacturers, especially Lenovo and Acer, are also picking up market share from the Texas-based company and Apple (AAPL) has had unusual success controlling the high-end of the market where PCs sell for $1,000 or more.
Dell has not been able to solve its sales problems with innovative products, price cuts, or better customer service, so it will increase the number of loans it makes to small business for Dell products. According to The Wall Street Journal, Dell has done well in the small and mid-sized corporate market and adding financial options may help cement its foothold in these sectors. The paper reports that “It has offered new financing arrangements to small businesses, including interest-free deals for some purchases of $25,000 or more.”
The trouble with Dell’s move is obvious. Commercial banks do not want to lend small businesses money because the economy is still troubled and lending to firms which have limited financial resources and small numbers of customers is risky.
The fact that Dell is willing to take the lending risk, one that its competitors are apparently not willing to do, is a sign of how far the PC firm is willing to go to get back some of the market share it has lost. Dell will almost certainly end up writing off some of these loans because small businesses are struggling significantly in the current economic climate.
But, Dell’s other option is to allow the better products of its competitors to continue to take away the PC firm’s business.
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Douglas A. McIntyre
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