Dell Tries for a Turnaround

 

This public attention comes just as Dell has been trying to engineer a rebound. During a June 24 gathering at the company's headquarters for financial analysts and media, CEO Michael Dell described the company as focused on boosting its traditional PC business, where it has fallen behind competitors such as Hewlett-Packard and Acer in terms of total shipments.

"We are feeling much better about our outlook this year in our commercial business, which is the bulk of our business," Dell told the analysts. The company estimated that its commercial PC business is worth some $46 billion annually, although it has also focused recently on consumer electronics such as smartphones and tablets. 

Perhaps the brightest light at the end of Dell's tunnel, however, is the universal need for a tech refresh; many enterprises and small and midsize businesses, grappling with slashed IT budgets during the global recession, delayed upgrading their now-aging hardware and operating systems. As money begins to trickle back into the economy, many of those companies have been slowly replacing their years-old systems; companies such as Microsoft, which is relying on increased sales of Windows 7 to boost its own bottom line, have noticed the resulting increase in commercial IT spending.

Dell could also benefit. "Given Dell's outsized exposure to the strengthening commercial PC market ([about] 67 percent of client revenue) and modest exposure to Europe ([about] 25 percent of revenue), we are not surprised that Dell is blessing consensus numbers for FY11," read a June 24 Raymond James research note.

A part of any Dell turnaround would likely need to involve settling its past business-which means closing out the AIT lawsuit, for better or worse.

"I would call [the case] a flesh wound," Endpoint Technologies' Kay said. "It's not life-threatening to Dell, but it needs to be treated immediately. The damage is to Dell's reputation."