During Dell's recent Efficient Enterprise announcement, executives said while Dell used to be viewed as a hardware provider, it is now much more. Dell is also making forays into the smartphone market, and one analyst predicted that Dell is likely to make an acquisition soon, while another suggested Palm could be a good catch. However, a third analyst said Dell may have lost its moment for an acquisition due to the potential success of the upcoming Palm Pre.
CEO Michael Dell, speaking at a
conference in Tokyo March 24, did
little to curb speculations that
Dell is considering an acquisition.
Some
are now suggesting that
Palm,
which is about to release its Pre smartphone, could be a good match for a
company that wants to be
more
than a computer maker.
"It
is true that we are exploring smaller-screen devices," said Dell,
confirming analyst claims that Dell is working on a smartphone or even possibly
an MID (mobile Internet device) similar to ones based on Intel Atom processors.
Kaufman Bros. analyst Shaw Wu wrote in a research note on March 20 that Dell
had presented carriers with smartphone designs but that ultimately carriers
didn't find them to be distinct enough from the offerings of market dominators
such as HTC, LG, Nokia, Motorola, Samsung
and Palm.
"We are also hearing the upcoming Palm Pre has not helped, generating
interest from carriers as a viable competitor," Wu wrote.
Wu also stated that
Dell
was "going back to the drawing board" with its smartphone, and
that would likely involve "vertical integration of some sort including
software and/or services. For this reason, we believe Dell is contemplating
making acquisitions to help this effort."
Speaking in Beijing March 26,
CEO
Dell appeared confident; the day before, his company had released a new series
of enterprise products, including servers and blades, and the CEO
suggested that U.S.
government spending might also work to his company's benefit.
"I wouldn't be surprised to see pretty encouraging trends from that
[server] business as we get into the second and third quarters, which for
fields like education and government are pretty healthy buying seasons,"
said Dell, according to an account in the Wall Street Journal.
As IBM, which currently dominates Dell in
the worldwide server market, appears to be engaged in
talks to acquire Sun
Microsystems, it appears Dell has still more motivation to expand its image and
offerings. Following Dell's press event in China,
a Yankee Group analyst was quoted as saying a Palm acquisition could help Dell
with its return to the smartphone arena.
Could a Palm acquisition work to the advantage of Dell-which, with its new
Adamo
by Dell brand, is also striving for a more design-minded and chic image?
"Dell
still has a pretty good cash position, and certainly could make a purchase, and
an important one," Roger Kay, president of Endpoint Technologies
Associates, told eWEEK.
"But I'd be wary of a Palm acquisition," Kay added. "Those
are ex-Apple guys, and they're as difficult to herd as cats."
Dell is not the only PC maker with an interest in the smartphone market. With
the iPhone, Apple has shown a path to success, and Acer recently announced that
it planned to enter the handset market. Even Hewlett-Packard has offered
handset devices for years, which leaves Dell itching to offer its own set of
devices.
This summer Palm will release its anticipated Palm Pre smartphone-an
"iPhone
killer," say its boosters-with hopes that it will
turn
around slumping Palm revenues. The problem for Dell, if the company is
interested in Palm, said Kay, is that the positive buzz around the Palm Pre
could make a Palm acquisition riskier for Dell-or, at least, more expensive.
"There was a time to entertain [the idea of buying Palm], but I'm not
sure right now that would make sense," Kay said. "A lot of front-end
marketing would have to be done to prove out the concept. Whoever heads that
effort would have to be a real evangelist."
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