What will the new Dell look like?

What will the new Dell look like?

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

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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.

Topics: Storage, Data Centers, Dell, Networking, PCs

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19 comments
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  • Facts versus fiction

    Had you done your research, you'd have realized that AppAssure is not a high-end networking company. Dell HAS made 2 significant storage purchases (Compellent and EqualLogic), they are combining SonicWall abilities with their networking expertise with Force10.

    What Dell wants to do is rid themselves of the continuous scrutiny by people (shareholders and people thinking that an consumption device is technology) worried about the falling revenue that would result from their desire to walk away from the commoditized consumer business that is having to compete with Chinese companies working with manipulated currency and very thin margins. Don't get me wrong, they do want to provide devices like the XPS 12, XPS 13, XPS 18 for consumers. That's profitable. But, let's face it, with Project Orphelia, the PC has become nothing more than a client hitting the cloud and requires little more than a chip on a USB stick.

    They have put together a complete portfolio of products to provide customers with a solution versus devices. Their server sales are up 18%, but it's not because they are selling them cheaper, it is because they are providing them as part of a solution that includes operating system, networking and client virtualization that provides end-users with a safe and secure image that is not kept on their BYOD device.

    Though it is hard for many to comprehend, Dell actually benefits from other company's devices (iPhone, etc) since they are selling the infrastructure BEHIND the end-user's device. Long ago Dell saw this trend and decided that, for the short term, they could benefit from creating a cute little device that would soon become obsolete or commoditized, or they could invest in creating infrastructure that supports it and develop their employees to have the knowledge to run that infrastructure. Knowledge in that is harder to commoditize and has a very high margin compared to end-user devices.

    Mr. Dell and the board has set the company up to excel and it is just now starting to come to fruition. 1/3 of their profit comes from enterprise solutions.
    redstateidiot
  • Focus on the Prosumers.

    Dump the Inspiron line and advertise the XPS machines.

    You've already dropped the "it's a Dell" image, just focus on keeping it away.
    ForeverCookie
    • I know you're right, but...

      I've been buying the Inspiron line for a long time and would hate to see it go. The time before last that I bought a 17" Inspiron notebook it was about $1800. The last time I bought the next edition of it (a much better equipped machine), the price had dropped to $700. No wonder they can't make money.

      Don't know what I'll buy once Dell dumps us consumers.
      nfordzdn
      • If you're willing to pay 1800 for a laptop

        then I'm sure Dell's XP line has a product for you. In fact, even at 800 they've got laptops.
        notsofast
  • Corporate America cannot live without Dell

    If you don't work in a large corporation then you won't know what I mean. You have either HP (which are expensive paperweights), or Dell. Nobody else offers the kind of infrastructure that legitimately works and obody else comes close to the OEM support.

    Like all big companies, they aren't perfect, but the PC market isn't dying in corporate America, you just don't need to upgrade as often anymore. The performance plateau that we've seen means that you can use a laptop or desktop longer than 2 years before it becomes obsolete. Tablets may have wiggled their way into the workplace, but they absolutely cannot fully replace a PC.

    Dell is really the only option around, otherwise you are just dealing with massive headaches of the smaller shops trying to keep up. We explored several options and always came back to Dell.

    Stop reporting that the sky is falling.
    Turismo
    • True, but

      I don't recall when laptops were a 2 year upgrade cycle. 3 years has been the norm. Companies buy the machines and keep them until the warranty is up (3 years), which i believe is the time frame that they can write them off. And if there's anything that's not written off, they can either sell them or give them to schools and write the rest off.

      As for service, if you're a business, you typically get significantly better service. I recall an out of warranty (just barely) with a dead drive. Dell's CS rep stayed on the line while I dismantled the laptop and went through a checklist of things. Oh and the wait time was pretty much 0.

      For my personal use, i just build my own desktops, but i wouldn't dissuade someone from buying a dell, so long as they weren't buy the bottom of the barrel models. You get what you pay for.
      notsofast
  • D E L L

    DELL, it's a 4 letter word and rhymes with H _ _ _ .
    .
    JUST BURY IT, like all propitiatory systems!
    Repair parts are WAY WAY to expensive.
    .
    fm-usa
  • I take it you don't like Michael Dell

    I don't think Ichann taking over the company is going to be as great as you think it will be. But there's really no way to know for sure.


    Got to love american "news" though. Objectiveness is nothing but a myth.
    grahamfluet
    • Greedy lowball offer?

      Tell us Robin, how did you come to that conclusion that the offer was too low?

      "They do not have the DNA to be an enterprise vendor today"

      An enterprise vendor like Apple is, is what you mean, right?
      William Farrel
      • Lowball is a matter of timing...

        To add to William Farrel's comment, folks seem to forget that the rumor of going private came out when stock was hovering ~$10/share which is where it had been for 3-4 months. And the 2 months prior to that it had drizzled down to $8-9. So for an offer to come in at 30% greater than the 3-month steady-state level is, by no means, a lowball to any but investment firms that bought in at $21-24 a few years back and rode that all the way down. They look pretty foolish to their stakeholders, so need to deflect the criticism before their stakeholders abandon ship.

        No, the problem now is whether Dell can remain a viable company without Mr. Dell at the helm or at least in the decisionmaking process. Technology companies run by bean-counters and investors do not fare well out in the real world outside the myopia and emotion of the investment world.

        The other option is chop-shop time and that's just what investors whose stake is only $$$, not the name or people, will go to in pretty short order. Their vision is limited to quick profit, not sustained (read: slow) growth and re-invention.
        vandalii
  • Something else to consider:

    I also noticed that their troubles seemed to start when they stopped exclusively selling online and started selling in mainstream stores, like Wal-Mart. Plus it didn't help that their spokesman "Steve" got busted for drug possession, which, we all saw coming because of the way he portrayed himself on the commercials.
    Richard Estes
  • Inspiron Line

    Nothing wrong at all with the Inspiron Line of PC's. I too use them and find them to be an excellent value for the money. I've had no reliability issues either. It would be a mistake to discontinue them. Scott Chamlee
    El Gordo69
    • It's all about margin

      For better or worse, the Inspiron line performs well as a PC, but not as a money-maker. Retaining or growing market share in an extremely low margin (arguably negative margin when considering the cost of warranty/support) market is suicide from a business perspective unless there is a halo effect from the offering. And while XPS/Alienware have some halo effect, Inspiron does not, so its value in filling out a marketing offering roadmap gets offset by its inability to bring money to the table in a tough economy.

      All that to say, agree Inspiron is a reasonable PC for the price, but the price costs Dell too much.
      vandalii
  • Dell

    Robin just a first opinion of your writing and thought process. I'd say you are a smug as****e and I bet any friends you have agree. Do something grand yourself rather than call down things you obviously know nothing about.
    Rennald
  • Prediction

    If Carl Icahn et al buy it, it will cease to exist within five years.
    John L. Ries
  • Latitude Series are good

    I dislike the consumer laptops like the Inspiron line. The proprietary desktops are a pain to repair. The Laptops are priced well, but the design is terrible from a repair prospective. Recently I had to completely disassemble a 15R to remove the Hard Drive. Total time about 90 minutes. A Latitude laptop takes about 3 minutes to replace the Hard Drive.

    I buy used Latitudes with Windows 7 Pro and sell them, much better than a Windows 8 Inspiron.
    John Hanks
  • Use a laptop longer than 2 years

    I think that can use a laptop or desktop longer than 2 years before it becomes obsolete...
    http://thedebtsreliefreviews.com
  • How do you like me now?

    "Dell was the only one of the top five server makers to increases its sales and market share in the first quarter of 2013, when the number of servers sold worldwide fell by 0.7 percent."

    http://www.zdnet.com/dell-wins-out-as-global-server-market-slides-7000015946/?s_cid=e539&ttag=e539

    Doncha wish your company was hot like mine...
    Julie Dinkins-Borkowski
  • Dell should buy HP computer division

    In my opinion I think dell should buy all of HP computer line up. That would give dell a larger customer base.
    Tsgt2007