Dell Has a Way to Go

By Chris Preimesberger  |  Posted 2011-09-19 Print this article Print


Despite its successes, Dell isn't all the way back to where some industry analysts think it should be. The stock price has been hovering in the $15 range for about two years; in late 2007, it was double that price. 

In 2009, during the height of the U.S. macroeconomic crisis, the company saw its revenues drop 16 percent in one quarter and was forced to cut expenses back by $3 billion and lay off about 2,000 workers in the PC division. Dell's most recent quarterly earnings report (Q2 2011) came in under Wall Street expectations and showed only modest gains, with revenue up a mere 1 percent over last year, totaling $15.66 billion.

Company Needs to Take Advantage of All Opportunities

So it behooves Dell & Co. to make good on all of its markets-especially those being vacated by a large competitor such as HP.

Peter Levine, a general partner at venture capital firm Andreessen Horowitz, has known and worked with Michael Dell in various relationships over "many, many years." Prior to moving into venture capital, Levine ran the data center and cloud group at Citrix, which he joined in 2007 after serving as CEO at XenSource. Previously, he was an executive at storage and security provider Veritas, which was bought by Symantec for $10 billion in 2005.

Levine said that more hardware companies are turning their focus on software infrastructure-similar to what Dell is now doing.

"I've seen them go through the evolution from being a PC/server vendor to being a full-service organization," Levine said. "The move to cloud computing-and the emphasis on software and building out a software/hardware solution stack around cloud computing-is an interesting and innovative approach for the company. They're taking their hardware and service assets, coupling that with software assets, and moving toward the cloud computing infrastructure space.

"Michael Dell is a visionary leader who's succeeded in the last couple of years to increase the value of the company from a customer perspective," Levine said. "That's ultimately how these things get measured. Their acquisitions in the service space have made them more comprehensive."

Nevertheless, Levine doesn't believe the company is completely out of the woods yet.

"There is a subtle difference between what I and other people might think of Michael Dell versus Dell as a company," Levine said. "Dell as a company, to me, still feels like a hardware company. I know they're rapidly changing that to increase their service offerings. Ultimately, I think it's going to come down to software, which is going to make a huge difference in their overall ability to deliver all these new capabilities.

"I think they're on a great path to get there. I think Michael's a visionary leader for the company-that's why he came back-and we can see a lot of things in process. Their next move, providing cloud infrastructure and hosting applications as a service, is a smart one."

Seeing a Changing Market

Pund-IT analyst King believes Michael Dell has learned some valuable lessons from other companies about what to do-and what not to do-in order to grow Dell's core business and expand into new areas.

"HP is a great example of this," King said. "It did $41 billion in the PC business last year at a 5 percent margin. Basically, a third of their business produced about 15 percent of their profits.

"What [Michael] Dell did was look around to see what other CEOs have done-especially [Samuel] Palmisano at IBM, who has moved quickly and aggressively to a software-and service-driven business, using software as a differentiator for their hardware.

"Dell will continue in the PC business and will find plenty of buyers. [Michael] Dell's kept his eye on the prize: the cloud and all the software and services that go with it.

"They're selling into nine of the top 10 Web services providers in the world, and they were the first vendor to create a hyper-scale cloud computing unit to focus specifically on those data centers. Dell may be underestimated by some people. That would be a mistake."

Chris Preimesberger Chris Preimesberger was named Editor-in-Chief of Features & Analysis at eWEEK in November 2011. Previously he served eWEEK as Senior Writer, covering a range of IT sectors that include data center systems, cloud computing, storage, virtualization, green IT, e-discovery and IT governance. His blog, Storage Station, is considered a go-to information source. Chris won a national Folio Award for magazine writing in November 2011 for a cover story on and CEO-founder Marc Benioff, and he has served as a judge for the SIIA Codie Awards since 2005. In previous IT journalism, Chris was a founding editor of both IT Manager's Journal and and was managing editor of Software Development magazine. His diverse resume also includes: sportswriter for the Los Angeles Daily News, covering NCAA and NBA basketball, television critic for the Palo Alto Times Tribune, and Sports Information Director at Stanford University. He has served as a correspondent for The Associated Press, covering Stanford and NCAA tournament basketball, since 1983. He has covered a number of major events, including the 1984 Democratic National Convention, a Presidential press conference at the White House in 1993, the Emmy Awards (three times), two Rose Bowls, the Fiesta Bowl, several NCAA men's and women's basketball tournaments, a Formula One Grand Prix auto race, a heavyweight boxing championship bout (Ali vs. Spinks, 1978), and the 1985 Super Bowl. A 1975 graduate of Pepperdine University in Malibu, Calif., Chris has won more than a dozen regional and national awards for his work. He and his wife, Rebecca, have four children and reside in Redwood City, Calif.Follow on Twitter: editingwhiz

Submit a Comment

Loading Comments...
Manage your Newsletters: Login   Register My Newsletters

Rocket Fuel