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Enterprise Hardware

Buyout Completed, Dell Aims at the Enterprise with Its PCs

Buyout Completed, Dell Aims at the Enterprise with Its PCs
September 13, 2013 10:46AM

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Analyst Laura DiDio said that in a global survey about reliability, Dell was ranked No. 1 in product performance and technical support. DiDio said Dell servers are commonly known as workhorses that last beyond their payback periods. Additionally, Dell has become known for its "very aggressive" pursuit of reduced carbon footprints and other environmental-friendly efforts.

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Whither Dell? That's the question being asked, most likely in other wording, following the news Thursday that the company's shareholders approved a buyout proposal to take the company private.

The $25 billion buyout by company founder Michael Dell and investment firm Silver Lake Partners will award each shareholder $13.88, of which $13.75 is for the common stock and the balance of 13 cents represents a special dividend. After 25 years as a publicly traded company, the buyout means that management will no longer have to answer to Wall Street as it tries to reshape itself to match the changed computing market.

The buyout plan succeeded over staunch opposition from some shareholders, including activist investor Carl Icahn, who repeatedly said that the price sought by Dell and Silver Lake Partners undervalued the company.

Continuing in PCs

Dell, who will now own 75 percent and will remain as company chairman and CEO, said in a statement that he was "pleased with this outcome and am energized to continue building Dell into the industry's leading provider of scalable, end-to-end technology solutions." He told analysts after the announcement that the company will look to "go back to our roots, focusing on the entrepreneurial spirit that made it one of the fastest-growing and most successful companies in history."

Dell the company made its name in the PC market, but has suffered as the world of personal computing moves away from PCs. Gartner, for instance, has reported that demand for PCs dropped 11 percent in the second quarter, only the latest of a series of declines. But Dell CFO Brian Gladden told news media that his company will continue in the PC market.

Laura DiDio, an analyst with Information Technology Intelligence Consulting (ITIC), pointed to several strengths that the company can build on. She noted, for instance, that in a survey conducted by her company about storage systems for businesses, 32 percent of respondents favored Dell's solutions, with EMC coming in second.

'Two-Pronged Strategy'

She also said that in an ITIC global survey about reliability, Dell was ranked No. 1 in product performance and technical support. DiDio noted that Dell servers are commonly known as workhorses that last beyond their payback periods. Additionally, Dell has become known for its "very aggressive" pursuit of reduced carbon footprints and other environmental-friendly efforts, she said.

These brand assets, including reliability, durability and greenness, among others, can serve as some of the building blocks for Dell to differentiate itself in the crowded computing marketplace, DiDio said.

To succeed long-term, of course, Dell will have to offer new products and services. For the business market, DiDio said, that will likely mean the company will get more deeply into services, "just as IBM did, even as Michael Dell pursues a two-pronged strategy" that continues to go after consumers.

In Dell's case, the target for services is mostly small- and medium-size businesses. This is a direction the company has been moving in, along with corporate software, but it now has to step up its game. In August it reported $14.5 billion in revenue for its second quarter, which represented a whopping 72 percent drop in net income.

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