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Dell's Buyout Deal Should Give The Company Renewed Business Flexibility and Stealth

Add date: 2016-11-29 Hits:60

Core prompt: Dell's buyout deal should give the company renewed business flexibility and stealth, but its customers need to know if Dell will be in the PC market for the long haul. "Now, Dell will be able to

Dell's buyout deal should give the company renewed business flexibility and stealth, but its customers need to know if Dell will be in the PC market for the long haul.

"Now, Dell will be able to better compete with HP, Lenovo, IBM and Cisco," said Patrick Moorhead, an analyst with Moor Insights & Strategy. "They can do what they want without the scrutiny of Wall Street and the SEC, and do it under the radar, making it harder for competitors to guess at Dell's next moves and then making defensive moves to thwart them."

However, whether Dell, the third-largest PC maker in the world, plans to continue to be a major player in the PC business is an open question. That question has customers - both enterprises and consumers - concerned.

"It's too early to tell how much Dell wants to remain in PCs," said Moorhead. "They could more easily reduce or exit the business as a private company... Dell customers, specifically business PC customers and channels, could be a little edgy until Dell announces it's in the PC business for the long haul."

Hewlett-Packard, which has been barely hanging on to its number one position in the PC market, used the news of Dell's buyout announcement to take a jab at its competitor.

"Dell has a very tough road ahead," HP said in a released statement. "The company faces an extended period of uncertainty and transition that will not be good for its customers. And with a significant debt load, Dell's ability to invest in new products and services will be extremely limited. Leveraged buyouts tend to leave existing customers and innovation at the curb."

The company went on to say that HP will work to pull in any customers who might be looking to leave Dell.

Dell announced earlier today that executives finalized a $24.4 billion buyout to take the company private. The deal includes CEO and founder Michael Dell's contributing cash and equity plus a $2 billion loan from Microsoft.

The buyout is expected to enable Dell, which has been a public company for about 25 years, to operate without shareholder and Wall Street pressures. The position could benefit Dell, which has been struggling in the past few years from a lagging economy and a PC industry increasingly under pressure from the popular tablet and smartphone markets.

"Escaping the noise of the market should allow Dell and the company's other owners to focus more on the signal of their long-term strategy," said Charles King, an analyst with Pund-IT, Inc.

So what will be Dell's long-term strategy as a private company?

A Dell spokesperson said in an email to Computerworld, "As we have stated previously, we remain committed to our strategy to be an end-to-end solutions provider for our customers, and that includes being a provider of desktop computers and laptops."

However, last July, Michael Dell said during a conference that the "new Dell" really isn't in the PC business anymore. It was a surprising statement from the man who runs one of the largest PC makers in the world.

"Well, in the last five years or so, we've really made a concerted shift in our business towards end-to-end IT solutions," said. "And if you think about the businesses that Dell is in today, there are really four of them. Certainly, we start with the client business, which is kind of transforming with all the things that are going on in mobility and client virtualization."

But after quickly mentioning his client-based business, Dell went on to talk more at length about the company's enterprise data center, server, storage, software, services and networking business.

Robert Enderle, an analyst with The Enderle Group, said he sees Dell remaining focused on its client strategy.

"Basically, Dell is going back to startup mode. What will emerge could be very different," Enderle added. "I think we will see Dell do some really interesting things with Microsoft going forward on the client."

King, though, said he expects Dell to continue expanding its business focus to be more of an enterprise IT company than a PC maker.

"Dell has been on the road to becoming an end-to-end IT vendor since Michael Dell returned in 2007, and I don't expect this deal to significantly impact or change that transformation," he explained. "Historically, data center solutions, software and services deliver much higher profit margins than commoditized products like PCs, so continuing to focus on those areas makes perfect business sense."

Moorhead said Dell needs to make its intentions clear before its competitors take advantage of any user confusion.

"For Dell's sake, I hope they make some definitive statements around that," he added. "If nothing else, HP and Lenovo will undoubtedly use any uncertainty to drive more of their own business."

keywords: Dell, buyout deal, business flexibility

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