The third largest PC maker in the world Dell Inc. (DELL) recently announced that it will team up with online T-shirt store/community Threadless to give a new look to its laptops.
Dell already makes a number of colors and designs available to customers through the Dell Design Studio. With the partnership, Dell will further enrich its Design Studio with exclusive designs from Threadless.
The agreement immediately adds 11 new designs from Threadless and there is the promise of additional new designs that could further personalize the laptop or netbook covers coming from Dell.
This could be an attractive option for the younger generation that is more likely to go for the colorful “designer” appearance intended by Dell. If the company is able to start a trend, it would no doubt have an impact on sales of its ultra mobile computing devices.
Market research firm Gartner Inc. (IT) has stated that sales of mobile PCs jumped up in the first quarter of fiscal 2010 due to growing demand in the consumer segment. Dell’s Threadless initiative is targeted at this burgeoning demand. The research firm anticipates spending in the professional sector to rise by year-end 2010 and in 2011 owing to a larger refresh cycle.
Dell is working on a number of plans to strengthen its position in this segment as well. However, there will be hiccups, given the fact that the details of a 2005 lawsuit was recently aired in the press, revealing that the company sold more than 11.8 million faulty computers from 2003 to 2005. Moreover, customer complaints at the time were ill-addressed by Dell. Recent evidence shows that Dell acted intentionally, which makes matters worse for the company.
Dell reported strong first quarter revenue with an encouraging 21% growth over the prior-year quarter, driven by strength across all its business segments. Dell expects fiscal 2011 revenue to increase 14.0% to 19.0% from the prior year, helped by the spike in consumer and corporate spending.
However, Dell’s relative weakness in emerging markets remains and the high debt level is also a concern. Moreover, stiff competition from technology majors, such as Hewlett-Packard Co. (HPQ), Apple Inc. (AAPL), International Business Machines Corp. (IBM) and Microsoft Corp. (MSFT) is always a factor to consider when considering an investment in Dell.
All things considered, we are comfortable with our short-term Zacks Rank #3 (Hold) rating on Dell shares.
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