Dell's comeback machine

August 12, 2008: 11:08 AM ET
The redesigned Dell Latitude line will offer colors, a Linux mode, and other un-Dell touches. Photo: Dell

I'm at Dell's design headquarters near Round Rock, Texas, getting a first glimpse of the company's colorful new line of business laptops that go on sale Tuesday, and I mention that the pink looks a lot better in person than online. A Dell executive is quick to tell me why. What I've seen on the website, he says, is consumer pink. "This is business pink."

Huh? Surely this must be some sort of joke. Everyone knows that buttoned-down Dell (DELL) doesn't do business pink. It's better known for dutifully boring machines, made to order with the latest technology from Microsoft (MSFT) and Intel (INTC), at a price a corporate bean counter could love.

But Dell is doing a few things differently as it navigates an overdue turnaround. Over the past three years its position in the PC industry has gone from dominator to underdog, as shoddy customer service, weak international distribution, and outdated designs have cost it the title of global market leader. (That isn't all it cost, as investors will tell you; Dell has also lost nearly $35 billion in stock market value since December 2004.)

One of the clearest signs of change is this redesigned Latitude laptop, the company's flagship model, which will be its first business laptop line to come in rainbow colors. The laptop's core design gets updated only every four or five years, making its debut a supremely important moment. Get this right, and Dell can shore up a weak spot where rivals have taken market share, and surge ahead as corporate buyers upgrade from desktops to laptops. Get it wrong and the company can kiss its comeback goodbye. Michael Dell himself was clearly aware of the stakes a couple of weeks ago when we talked about Dell's future –he singled out the Latitude as a strategically important product.

So when I'm invited to Texas as the first reporter to see what the team has come up with, there is an undeniable subtext: Dell has something to prove.

It's understandable, given all the trash-talking Dell has endured lately. Once it started losing ground and its stock dipped, the detractors piled on with all the old put-downs: Dell doesn't innovate. Dell's marketing sucks. Dell designs machines with corporate IT departments in mind, not real people.

Back when Dell was whipping everyone in the PC industry, it was easy to shrug off the insults. Dell innovates where it matters, execs would say, in the supply chain and with its direct sales model. Now it's easy to imagine the talk is hitting a nerve.

Why? Because in a maturing PC market, Dell's traditional weak points have become must-win areas. In the early days of the PC market, when computers were expensive, every new Intel chip offered a major performance boost and every Microsoft operating system seemed to offer must-have features. Back then, Dell's IT department focus, direct-sales efficiency and price leadership trumped everything else. But these days, chip and OS upgrades are no longer major events, and PCs are mainstream enough that much of the growth is in the consumer market, and consumer trends even influence business purchases. Now, design, innovative features and broad distribution matter more than price cuts, and Dell is scrambling to adjust.

For instance, Dell realized its designers can no longer craft Latitude laptops simply to satisfy IT managers. Design director Ken Musgrave tells me that as tech-savvy Gen Y'ers have entered the workforce, they've brought a sense of digital entitlement; they don't want to use equipment that isn't cutting edge and cool, and Dell's brand doesn't have credibility with them yet.

"They're coming in having had a cell phone when they were 12, having had a MySpace page through high school, and they're used to having things their way," Musgrave explains. "They're not making the purchase decisions yet, but they will be."

The diminutive cherry-red laptop he sets on the table in front of me a few moments later should go a long way toward getting Dell some street cred. In development this model was code-named "Mini Cooper" I'm told, and as weight-conscious engineers put it together, they tracked each component on a spreadsheet and obsessed over how to trim excess grams to meet a weight target. (One weight-saving move was to strip the metal casing from the laptop's flash-based storage drive.) The payoff: it tips the scales at just a kilogram - 2.2 pounds. (A full range of Latitude sizes is available.) When I ask why the fixation on a kilogram, they shrug. It was just the goal they picked, they say. To keep them focused.

I'm used to seeing this kind of design daring from Apple (AAPL) and Sony (SNE). But Dell?

"Dell's laptops probably were stockier than average in the past, so it had more ground to make up," says Roger Kay, CEO of consulting firm Endpoint Technologies, who was also pre-briefed on the new Latitudes. "I think these might actually beat some expectations." They should also blunt Hewlett-Packard's (HPQ) efforts to steal away corporate customers.

There are some surprises beneath the surface of the Latitude line as well. One is an optional Linux-based low-power mode called Dell Latitude On, which boots in two seconds. It offers more than a day's worth of battery life for basic tasks like web surfing, Exchange e-mail, and viewing e-mail attachments, and runs on an ARM-based (ARMH) chip rather than the main Intel processor. (HP and Lenovo laptops offer similar Linux modes, but with fewer capabilities.)

Another is a Broadcom (BRCM) chip that brings stronger security to the laptops by handling encryption on the hardware. But the clincher seems so simple, it's a wonder no one had done it before – a door on the underside of the laptop that, after you remove it by loosening one screw, offers up all the major components for quick maintenance. One engineer told me that despite all the other bells and whistles in the new Latitudes, the easy-access door is what got one Fortune 10 IT manager's heart pounding during a recent show-and-tell.

All of which bodes well for Dell's chances of extending its comeback with the Latitude launch. The company seems to be doing everything right – courting Gen Y, minding design, and still managing to keep IT managers happy.

Well, there are a couple of kinks to work out – and the sooner the better for the company's revenue and buzz. I'm told during my visit that Dell Latitude On won't be available until a few weeks after the launch, because there are a few issues to iron out still. And – darn it – Musgrave tells me that engineers are still puzzling over how to get paint to consistently stick to the Latitude's magnesium skin. Which means we'll have to wait for the promised range of rainbow colors.

And I was so looking forward to business pink.

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