More

    What’s Next for Dell?

    Now that the deal to take Dell private is all but done, the next logical question is: Where does the company go from here?

    Virtually everyone these days has an opinion as to exactly what Dell should do with each and every product line, but the broader consensus is that Dell is likely to shed its PC division, much like IBM did in 2004, to concentrate on higher-margin enterprise solutions. Without having to deal with those pesky financial statements that Wall Street requires every quarter, Dell would have much greater flexibility in repositioning itself for emerging markets and technology trends, and fewer people will notice if things go south.

    Of course, this assumes that the buyout deal goes according to plan, and that is far from certain at this point. For one thing, the $2.4 billion deal is the largest since the heady days of 2007, and already some sharks are smelling opportunity in the water. HP, for one, has not been shy in its determination to peel enterprise customers away from Dell, and then there are grumblings from several key shareholders who feel they are not getting top dollar for their stakes. If the lawsuits start flying, they will most certainly delay the buyout process and drive up costs.

    For the enterprise, a re-focused Dell will benefit some more than others. As Gartner’s Bryan Britz explained to FierceCIO.com, Dell has always excelled in commodity systems and services, but not so much when it comes to customization. The good news for Dell is that the cloud and new modular platforms are tailor-made for low-cost, commodity components. Top-tier enterprises with specific requirements may want to see how the reconstruction proceeds before turning to Dell solutions, however.

    Already, though, Dell is showing signs that it means business when it comes to advanced enterprise architecture. Just last month, the company announced a new SAP HANA workload appliance that mashes in-memory computing with the PowerEdge R910 rack server and Compellent storage to enable non-disruptive scalability up to 8 TB. As well, the Active System 800 converged infrastructure solution has been updated with automated application deployment tools acquired from Gale Technologies.

    The short-term strategy, then, seems fairly clear: Get out of the money-losing PC sector and court enterprise customers as they transition from old-line infrastructure to new mobile and cloud environments. But where will that leave the company in, say, five years, asks Forbes’ Greg Satell. Today’s investors, Microsoft among them, are probably not looking for a long-term commitment, particularly if Dell positions itself as a rival to HP, IBM and other platform providers. So it is entirely possible that the entire company could be up for sale by the end of the decade. When that day arrives, would someone like Apple be interested in shoring up its enterprise infrastructure portfolio? If that seems crazy, remember that it was also crazy when storage-maker EMC dropped a boatload of cash to acquire a small server virtualization company called VMware.

    The only thing that still puzzles me about this entire story is why Michael Dell feels he needs to take the company private in order to shed the PC business. Hardly anyone thinks PCs are a solid business proposition anymore, so it would be surprising if shareholders put up much resistance to a sale.

    My suspicion is that we have not heard the last of Dell’s reorganization strategy. The other shoe will probably drop soon, but only after control of the company is firmly in the hands of those with full knowledge of the plan.

    Arthur Cole
    Arthur Cole
    With more than 20 years of experience in technology journalism, Arthur has written on the rise of everything from the first digital video editing platforms to virtualization, advanced cloud architectures and the Internet of Things. He is a regular contributor to IT Business Edge and Enterprise Networking Planet and provides blog posts and other web content to numerous company web sites in the high-tech and data communications industries.

    Get the Free Newsletter!

    Subscribe to Daily Tech Insider for top news, trends, and analysis.

    Latest Articles