Wireless Updates, Dell Rebuilds

Sprint Nextel Corp. launched its $99.99 unlimited plan, called Simply Everything, to compete with the flat-price offerings of the other U.S. wireless carriers. Elsewhere, details regarding Apple Inc.'s new software development kit (SDK) began to emerge. Lastly, Dell Inc. released disappointing fourth quarter 2008 financials.

Focal Points:

• One week after its competitors launched their $100 per month unlimited voice plans, Sprint has released its own product. Rumors of the company potentially undercutting the other wireless carriers by $20 to $40 per month proved false, and instead, Sprint decided to include all of its available service offerings into its unlimited plan. This includes unlimited use of the company's voice, data, e-mail, global positioning service (GPS) guidance, music, television, and Web access services. Additionally, the company will discount customers adding more than one line to the plan by increments of $5 per month on up to five lines total. Sprint posted a net loss of $29.5 billion for the fourth quarter 2007 due in large part to its $29.7 billion write-down of the Nextel Corp. acquisition, and lost 108,000 customers in the quarter. CEO Dan Hesse stated that the new rate plan is designed to ease customer purchasing options rather than match competitive offerings, and that he feels that wireless data services will be the most important battle ground in the future. The company expects further customer losses to occur.
• Apple has scheduled the iPhone Software Roadmap press event for Thursday, March 6, where it will provide SDK access and toolsets to held developers write applications for the iPhone and iPod Touch. As is typical with Apple, restrictions are expected regarding how the applications can be developed and sold. The company intends to sell developed applications using the iTunes store – which is the primary means Apple uses for software updates and media sales – and that the company intends to retain veto power over which and the number of applications that can be installed on a device. Additionally, the SDK will prohibit developers from accessing peripherals connected through the iPod dock. Early reports suggest that restrictions apply to commercial applications rather than those freely distributed. Apple has also said to expect "some exciting new enterprise features," though specifics are unknown at this point.
• Dell continues to struggle with reengineering and reinvigorating its business, as evidenced by its most recent earnings report. Although revenue rose by approximately 10 percent to $15.99 billion, the company experienced a six percent net income drop from $726 million to $679 million. Part of the decline was related to two recent acquisitions and $54 million in severance costs and building closures. Though the company has already reduced headcount by more than 3,000 over the last nine months, more layoffs are expected as the company retools. Dell also recently rolled out a new, globally-consistent support offering called Dell ProSupport. The commercial support product offers two customizable packages aimed at corporations both with and without dedicated IT staff. Also recently completed was the acquisition of The Networked Storage Company (TNWSC), which helps customers quickly move to simplified and standardized storage offerings.

Experton Group believes Sprint has a steep climb ahead of it as it tries to restore customer and investor confidence. By offering all of its services in its unlimited plan, Sprint has successfully one-upped its competitors, but by its own admission, will probably do little to win over new customers given the poor perception and low satisfaction ratings shared by much of the public. Sprint will need to hope its WiMax investments can get off the ground quickly and that it can successfully blanket a significant portion of the country with broadband speeds rapidly by late 2010 early 2011 to really rebuild its services and brand image to a differentiable level. Its ability to offer more and greater services for a lower price should help Sprint limit the bleeding of customer, but the long time required to regain ground may force the company to sell its business over the next 24 months. IT executives satisfied with Sprint's services should pressure the company to reduce enterprise pricing to beat regularly available offers by the desired discount level, or should look elsewhere for discounted wireless services given the heady pricing pressures facing the industry.

Though Apple has remained coy about its plans for making an enterprise play with its iPhone, consumer and enterprise customers are nonetheless clamoring for the device. The required restrictions imposed on the use of Apple's SDK will likely prove too limiting to allow for the iPhone to become a true BlackBerry competitor; however, Experton Group expects enterprise-class capabilities including virtual private networking and e-mail synchronization to be readily in the works. Either or both capabilities could arrive this week.

Enterprises should not consider the iPhone as a preferred platform until after Apple and the iPhone demonstrate sufficient access to device applications, ease of corporate extensibility, and device management and tracking.

While Dell will likely suffer a few more hits, Experton Group expects the company to be able to pull out of this tumultuous time in very good condition. Dell is reacting appropriate to customer desires by improving support and quality levels, as well as enhancing its channel strategy to better position itself in front of its intended audience. Still, Dell will need to improve its application, consulting, and services capabilities to address growing enterprise concerns regarding best practice implementations and the need for meaningful innovation.