Only a fool would doubt Michael Dell's ability to pull rabbits out of hats but even the Texan wizard needs a new trick sometimes. As Dell turned in another routinely superb quarter last week it may seem churlish to cast doubts on the company but the truth is that Dell needs some back-office firepower as rivals turn their cannons towards the Lone Star state.
Dell still has a one-track mind when selling to the enterprise. Two-track if you break the industry term Wintel into its Windows and Intel components. Dell has never strayed from the Wintel path since it was founded in 1984, perhaps because Dell himself remains chief executive officer. Dell, still only in his mid-30s but the longest running chief executive in the industry ÿ according to the company has never seen a reason to switch from his two true loves.
Why should he? As Windows NT has walked into departmental servers, casually picking off Unix and NetWare domains, Dell has pocketed the dollars. The same happened with Intel in workstations and servers as the weaker Risc elements fell by the wayside. Nobody has delivered more joy to its shareholders than Dell over the last few years. Any wearying of affection from Wall Street for their old darling could only be put down to the familiarity of the perfect spouse.
But if you look at all its rivals, Dell looks thin on top. IBM has RS/6000, AS/400, and S/390; Sun has Sparc/Solaris; HP has kit running HP-UX; and Compaq has the Alpha and Tru64 twin-set given to it by Digital. Dell really tops out at Pentium III and Windows NT and that's wasteful considering the goodwill it has among the very largest organisations in the land.
With IA-64 not due for 15 months or more and Windows 2000 likely to appear at around the same time, Dell needs to plug this gap to meet its customers' needs. I don't expect this to occur through acquisition. Dell has a handcrafted corporate culture you can touch as you walk into its Red Rock offices. It's a Texan `this is the way things are done around here' feel and it wouldn't suit grafting on a slice of California.
But Dell is good at building up relationships. It has become the benchmark in managing customers over the phone and now over the Internet where it has individual sites for individual customers and conducts over $14m a day in business. It also resells Data General Clariion storage equipment. If Dell resold somebody else's mid-range and top-end systems it would make a lot of sense. Compaq is out of the question due to the firms' rivalry but Sun is possible and IBM better. For a long time now, Dell has gone its own way. Selling direct when everybody said it needed new channels. Selling into large accounts when everybody said it would never move up the food chain. A company with 23,000 staff has to keep a close eye on its customers though and I can't believe more of them don't want to buy more, bigger kit from Dell.
For a Sun or an IBM, Dell would be a great channel to market and Dell could use the power. Maybe in return, Dell could provide PCs for this pair. Now that really would provide some fireworks all round. Whatever happens, Dell does not deserve the Wall Street brickbats it received after last week's financials. This is a company with long-term prospects, huge cash reserves and most importantly the faith of its customers.
Missing revenue expectations set so high means nothing at all, and if analysts are looking for overpriced companies there are plenty of alternatives they should check out before downgrading Dell. If it can step up the enterprise beat few rivals will be able to live with it.