Dell aims to diversify away from PCs, but how?

Dell aims to diversify away from PCs, but how?

Summary: Dell chief Michael Dell said that the company will pursue acquisitions, alter its business mix upstream away from PCs and be an innovator in the data center. The exact game plan, however, was unclear.

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Dell chief Michael Dell said that the company will pursue acquisitions, alter its business mix upstream away from PCs and be an innovator in the data center. The exact game plan, however, was unclear.

Dell's analyst day on Tuesday was designed to show the company's overall strategy, but was short on detail in many areas. After all, why would Dell signal what companies it planned to acquire?

Much of Dell's initial focus was on data center innovation to indirectly counter efforts from the likes of Cisco Systems to retool data centers. Dell didn't mention any rivals by name, but he did note the landscape is changing as vendors like Oracle and Sun converge and new players like Cisco enter the server market (Techmeme).

Dell downplayed "proprietary stacks" and said that talk of next-generation data center models were "overhyped and overdone." "We're not hearing a lot of it in the market place," said Dell. That said "this is really only the start of the evolution of the data center," he noted.

Also see: IT budgets: Shifting by the week?

From there, Dell went on to talk about simplifying the IT environment and moving up the stack to software and services, but it wasn't clear how exactly Dell would get there. The chart below illustrates how outgunned Dell is on the services front relative to enterprise technology economics.

The big question at the analyst meeting was this: How will Dell diversify from a business that relies primarily on PCs and servers?

CFO Brian Gladden showed a few slides that illustrated the Dell conundrum. The company is garnering 59 percent of its revenue from PCs. In an understatement, Gladden said depending that much on client revenue "is a challenge."

Executives acknowledged that Dell will shift its business, organically and via acquisitions, but timing and specific markets were sparse. How many years will this transformation take? Dell did note that the company's $5.4 billion services unit is larger than folks realize. The rub: Those services are typically field support, help desk and other low margin items. The real dollars are in those big consulting gigs.

Dell executives noted that they would be interested in acquisitions that would scale the services business faster. These deals would focus on intellectual property, technology and in some case headcount. However, it didn't sound like Dell would go for some big bang services deal.

While it's unclear how Dell will break into new markets, Dell did say that "you can expect us to be disciplined with our/your capital." In other words, Dell will pursue more acquisitions like its purchase of EqualLogic, a deal that has paid dividends and boosted growth in the storage market.

On IT spending, Dell said he expected enterprises to "refresh first in storage and servers and then clients."

Topics: Banking, Data Centers, Dell, Hardware, Storage

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23 comments
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  • Dell should simply...

    make an Android handset that gives users root and easily allows people to do things like voip (or more accurately allows developers to create apps that can do things like that).

    If the real power of the handset were available ... it could really be useful for many people.

    The technical challenge for them on this would be enabling the phone to get packet rates on various networks. For example, users who selected a carrier and paid for unlimited data could get the flat rate and not have to pay for each packet.

    Carries don't want users to have it both ways though...

    The answer is to give consumers what they want and need. (Or convince them what you have is what they want and need -- which I don't think Dell can do).
    javajunkie@...
  • Dell should also

    be an innovator like they say!

    Kindle? Please!?!

    Dell could kill that by looking at what students do. Read, research, present.

    Now give students a killer tool to do that. Start with an textbook reader and figure out how to mostly easily allow student to do the research necessary and how to present that.

    I know you are saying get way from consumer electronics but... if they can't do what they do best better than others...

    How can Dell help people manage the overwhelming amount of information and complexity we all face. OK maybe not everyone perceives themselves as being woefully uninformed but surely a killer device could easily convince us all of that.

    javajunkie@...
  • Dell should also

    be an innovator like they say!

    Kindle? Please!?!

    Dell could kill that by looking at what students do. Read, research, present.

    Now give students a killer tool to do that. Start with an textbook reader and figure out how to mostly easily allow student to do the research necessary and how to present that.

    I know you are saying get way from consumer electronics but... if they can't do what they do best better than others...

    How can Dell help people manage the overwhelming amount of information and complexity we all face. OK maybe not everyone perceives themselves as being woefully uninformed but surely a killer device could easily convince us all of that.

    Dell should also lobby really hard to get research from public universities accessible where it can do some good, and then devise a strategy to best cope productively with that -- meaning a foot in the door of data centers.


    javajunkie@...
    • The best tool is...

      ...the textbook!

      Seriously, Amazon have done the kindle already,
      what profit would there be for dell in
      competing? Amazon can sell the kindle cheap as
      it also establishes a new source of income for
      them as people buy books.

      Everything you suggest makes absolutely no
      fiscal sense for Dell to do. Spend lots on
      design & research? Lobby hard? Designing
      something for students, who sometimes can't
      afford books let-alone expensive devices that
      replicate books?

      Really, if you want a company to do help you
      manage an overwhelming amount of data, I'd
      approach Google and ask for something like it
      in Google Chrome OS. I mean, it's gonna be on Netbooks, which are cheap enough and portable
      enough for students. That way, you trade a
      bunch of private information (basically, a
      little bit of your soul) in exchange for
      knowledge (which is, after all, power).

      Oh Google... Trading students souls with them
      for power... I sometimes wonder how you manage
      to be such a [i]good[/i] company. :)

      (Joking aside, if you want someone to lobby for
      freedom to access information and 'do'
      information management with large quantities of
      data then Google are probably your best bet)
      Li1t
  • RE: Dell aims to diversify away from PCs, but how?

    Well, it is surprising to learn how much Dell spends on services. As someone who has worked with Dell from corporate IT to the small to medium business area, I can say that Dell has done the former quite well, the latter terribly. Deviate one iota from Dell/Windows, and Dell support becomes useless. Better for them to focus on the large datacenter and leave the small business and consumer market to more competant companies.
    mpkilarj
  • Left behind and increasingly irrelevant

    Dell must be feeling left behind and increasingly irrelevant by the
    important players in the game.

    Their business model is utterly dependent upon hardware sales, and not
    very good ones at that. They're chasing their diminishing share of a diminishing market down a price war drain.

    Dell himself isn't even relevant as a commentator anymore.

    The most interesting thing will be how many credible comments this non
    story attracts here!
    Graham Ellison
  • RE: Dell aims to diversify away from PCs, but how?

    Dell cant even get an efficient online ordering system to work. I ordered a monitor and they double billed me. Then I call them up and get some silly sounding woman with a very Indian/British accent. I got the problem resolved, but they caused the problem to begin with. This is typical of customer service from Dell. If this had caused me to write bad checks I would have been very upset. This kind of lack of concern for your business is inexcuseable. They did not even offer me any free-bees or discounts for messing up my order. Very Sloppy.
    ceh4702
    • It's worse than that

      You know a company has totally fallen from grace and become utterly
      irrelevant, when hours and hours after Larry posts a positive story
      about them [well, as positive as anyone ever could be about Dell], and
      only 7 people have posted a comment on it. Seven!

      Well, what shall we talk about now? I hear Microsoft has been voted
      the UK's top brand, swapping places with Google, last year's winner.

      But that's not the most ludicrous part. Rolex is in second place! Now,
      given that 99% of Rolex watches sold in the world are Chinese fakes...

      No, you're right, the MS bit is the most ludicrous!!
      Graham Ellison
    • It's the same with HP

      [i]Dell cant even get an efficient online ordering system to work. I ordered a monitor and they double billed me. Then I call them up and get some silly sounding woman with a very Indian/British accent. I got the problem resolved, but they caused the problem to begin with. This is typical of customer service from Dell. If this had caused me to write bad checks I would have been very upset. This kind of lack of concern for your business is inexcuseable. They did not even offer me any free-bees or discounts for messing up my order. Very Sloppy.[/i]

      I went through something quite similar with HP, so it's not unique to Dell. They're all like that, except Apple.
      Wintel BSOD
      • My Brother-In-Law works for HP

        They have been outsourcing, and Dell does as well. HP and Dells QoS have been going down hill. He even had a report that mapped the more out sourced work with the Quality Survey's. While not an a fan of Job/Apple, they do keep the support here and work to make sure it stays to notch...
        TheBottomLineIsAllThatMatters
  • How to grow Dell

    To grow, Dell need to do 2 large purchases

    EMC - Storage
    Unisys - Service, Big Iron Enterprise Grade Hardware (ES line) and Business Grade App's (Banking Platform).

    Anything consumer is a waste of time as everyone else are already there (e.g. Apple) or struggling (Sony/Phillips).
    neil.postlethwaite
    • Unisys????

      Are they still there? Really?
      Mac_444
      • By their fingernails

        I wouldn't be surprised if they're history by the end of the year.
        Wintel BSOD
      • Unisys is profitable

        Their latest 10Q shows a 3% net profit.
        davebarnes
  • RE: Dell aims to diversify away from PCs, but how?

    I read that article and all the attached screens, as well as other articles on the same topic, and I have to say that what Dell "announced" sounds more like a corporate version of a Bucket List.

    There's a lot of things they "want" to do, but no plan on how they're going to do it. It would be akin to me taking my list of things I want to do in my life and typing it more professionally under the title of: "Diversifying my Life Experiences to be a More Well-Rounded Person".

    I can make my list sound as professional and business-like as I want but, at the end of the day, without a plan on how to achieve these goals, it's [i]just[/i] a list of things I hope to do. Same here. I see a lot of "hope to do" with zero planning.

    Must really stink to be Dell these days with computer sales stagnating and every Dell attempt to copy popular consumer electronics ending up an utter failure. I'm sure they're trying to keep the company from becoming another Gateway (who is completely OUT of direct sales these days), but the question is: Is it too late? To do what they're planning, they have to take on some real industry behemoths. Do they have the wherewithal to be able to do so or will it ultimately break their financial back?
    Captiosus
  • RE: Dell aims to diversify away from PCs, but how?

    It is a very good option and i think they will be able to gain a better share of the market.

    I suggest IT services, mobile phone ,ip phone and all that.

    I believe that Dell can come up again if they cpmbine good planning god customer service and better vision

    It is not too late. DEll MUST THINK FOR A CHANGE

    Chinelo

    Endurance Nigeria
    Chinelo
  • RE: Dell aims to diversify away from PCs, but how?

    As someone who works in the alarm security field, I think Dell could be a power player if they entered the field. AT&T used to be our best seller in the early to mid-nineties based on name brand alone. The same could hold true for Dell, but even more so for Microsoft,Google,or Apple. Apple wasn't doing so great until they thought outside the box with the iPod. Dell needs to do the same type of thing.
    step69
  • RE: Dell aims to diversify away from PCs, but how?

    I am surprised by all the negative comments about Dell. Most of the hard core computer people I've ever met consider Dell to be the "Gold Standard". I would understand if they are coming from Apple/Mac users because of the Jobs/Dell feud, but I don't think it is. What has happened to change the perception of Dell?
    step69
    • Dell never was good.

      Been in this business for a LONG time.

      Dell = $hit, always has, always will be.

      They are nowhere near the "gold standard".
      itguy08
      • Sony might be the closest to a "Gold Standard"....

        ...but with as much pre-installed, useless bloatware as they put on their machines, they really are bucking to go down a notch or two.
        Wintel BSOD