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?
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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Talkback
Facts versus fiction
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.
Focus on the Prosumers.
You've already dropped the "it's a Dell" image, just focus on keeping it away.
I know you're right, but...
Don't know what I'll buy once Dell dumps us consumers.
If you're willing to pay 1800 for a laptop
Corporate America cannot live without Dell
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.
True, but
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.
D E L L
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JUST BURY IT, like all propitiatory systems!
Repair parts are WAY WAY to expensive.
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I take it you don't like Michael Dell
Got to love american "news" though. Objectiveness is nothing but a myth.
Greedy lowball offer?
"They do not have the DNA to be an enterprise vendor today"
An enterprise vendor like Apple is, is what you mean, right?
Lowball is a matter of timing...
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.
Something else to consider:
Inspiron Line
It's all about margin
All that to say, agree Inspiron is a reasonable PC for the price, but the price costs Dell too much.
Dell
Prediction
Latitude Series are good
I buy used Latitudes with Windows 7 Pro and sell them, much better than a Windows 8 Inspiron.