Wednesday, July 30, 2008

I can’t tell you why

This morning’s Wall Street Journal says that Dell is readying a new MP3 player to compete with the iPod. Unlike its failed effort in 2003, this would also include a client application and download service for both music and video. As CNET notes, the Page B1 article makes a nice trial balloon.

It seems like Michael Dell dreams of surpassing Steve Ballmer’s success with the Zune. In the US, Apple has 70+% and Microsoft has 4% (Both Apple and Dell are much less influential overseas, so Dell has to hope that he can first gain US market share.)

To make this work, Dell would have to move from assembling products from standard parts to being able to do its own systems integration. Of course, that is why they bought Zing last year (presumably for something close to $50 million).

It’s not completely clear, but providing its own service would appear to shift to a differentiation strategy — away from its historic strength as a low-cost, commodity producer with low R&D. It certainly is part of an ongoing (and mostly unsuccessful) effort to achieve a consumer market share comparable to what it has with big business.

Why is Dell doing this? The story brings to mind a song by my favorite band: I Can’t Tell You Why.

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