Dell Looks Beyond its PC Business – Again?
By Larry Walsh
Standing Headline: “Dell looks beyond its PC business.” Dell has been doing that for, um, a decade? Two? Still, the 9/7 WSJ article on Dell highlighted a couple of facts worth noting.
1) Dell last year hired away IBM mergers and acquisitions exec Dave Johnson.
2) Even as actual PC sales have increased, the percentage of Dell’s revenue that comes from PC sales has declined every year since Michael Dell returned to the helm in 2007. Since the company acquired services firm Perot systems in 2009, you would expect that the services portion of revenue would increase. And the acquisition of Equallogic in 2007 means you’d expect the storage component of revenue to increase also.
But it all comes down to the fact that being a vendor of PCs is not all it’s cracked up to be. The PC is a more ubiquitous and powerful device than ever. But you can make the case there’s no future in the PC business – at least not as an innovative, high-growth and above all, high-margin business. IBM made that decision a number of years ago when it sold its PC business to Lenovo and focused the bulk of its business on integration and services – while remaining a comprehensive hardware vendor and reseller.
Is the light that dawned on IBM way back then only now dawning on Dell?
Dell has been trying to become a comprehensive enterprise IT vendor for some years now, while not renouncing its high-volume commodity business model. It has been a delicate balancing act.
What is clear is that Dell will continue to make acquisitions to execute this strategy. With $61 billion in revenue, Dell is third among the Big Four – HP, $115 b.; IBM, $96 b.; and Oracle $23 b. (all figures 2009 gross revenue). Dell’s strengths are a solid hold on the commodity laptop, desktop and server market; growth in storage and services. And I might say, its heritage – a no-frills model that has stood it in good stead as bigger and seemingly more ambitious companies have fallen by the wayside. In backing away and letting HP have 3Par it showed just that kind of common sense.