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What will the new Dell look like?

Dell — #3 in PCs — is in play with three bids on the table to buy the company. What are the buyers planning to do?

Dell's big problem: it is losing market share in a shrinking business. The PC business is maturing and the low-price schtick that Dell rode to success is no longer enough.

Michael Dell has been pushing his namesake company in the direction of enterprise and cloud data center products and services. He's bought several interesting storage companies: EqualLogic, Compellent and AppAssure, Force10 (a high-end networking company) and Perot Systems in the last 5 years.

Especially in the cloud, the market margins are thin but the volumes are huge. That's a market where Dell's operational excellence can win.

While the company's balance sheet is strong (with about $3.50 per-share of net cash), turning Dell into a growth company is going to require major changes.

These include:

Shrink the PC business. The benefits of scale aren't important to Dell in higher margin data center markets. They'll give up on the low-end consumer space to focus on more profitable notebooks for road warriors.

Make a bold move in storage. In the new world of Big Data storage is the critical piece, both in cost and capability. If Dell could harness its low-cost expertise to scale-out storage they could have a hit. They need something, since their [dumb] deal with storage giant EMC went south.

Recast the corporate culture. Dell is a classic stack 'em high, sell 'em cheap hardware company. They do not have the DNA to be an enterprise vendor today. Getting there will require the corporate equivalent of a heart, lung and liver transplant.

Goodbye Mr. Dell. Mr. Dell has irritated many shareholders with his greedy lowball offer for the company. Nor has he had great success refashioning the company since he took control in 2007. The new owners will ax Mr. Dell. Unless he's part of the winning bid.

The Storage Bits take. With over 110,000 employees and more than $50 billion in revenue, Dell is a substantial enterprise despite its lackluster results over the last 5 years. Let's hope that whoever ends up running the company gets it right.

Comments welcome, as always.  Alas, Michael Dell is no Steve Jobs.

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