Is Dell Poised for an Acquisition?

 
 
By Michelle Maisto  |  Posted 2009-03-26
 
 
 

Dell is looking to put its focus on what the company calls "the efficient enterprise."

During a March 25 press conference-streamed live around world via Webcast-Dell announced fourteen new enterprise products that put the focus on what Steve Schuckenbrock, vice president of enterprise products, called "three critical resource areas": people, time and money.

New blades, servers and workstations were announced, as well as new enterprise-class storage hardware, software and services optimized for virtualized environments. A repeated theme was doing more with less.

Schuckenbrock said Dell's focus on more "purposeful design" started approximately three years ago, when "Michael Dell took the reins." At Dell, Schuckenbrock said, "our designs are now about solving customer problems, versus just adopting the latest technology."

(Lest anyone think the svelte new Dell Adamo laptop is just about putting out the latest technology, he continued: "Adamo was purposefully built to make a statement about design, and to serve a specific clientele with its particular capabilities.")

Service was also a big focus, with the introduction of Dell ProSupport, offering custom services based on a customer's environment and needs; Dell ProManage, in which Dell will ship, deploy and manage a server for a customer, even replacing it once it comes to the end of its life cycle; and Dell ProConsult, a consulting service for addressing customer pain points.

The implied and spoken point being: Dell used to be thought of as a hardware provider, but now it's more of a complete solutions provider.

"Dell has been mostly hardware-it always has had some services and software, though subordinate to hardware," said Roger Kay, an analyst with Endpoint Technologies Associates. "But to better compete in the enterprise space, Dell does have to have a more rounded-out offering."

Separately, speaking in Beijing on March 26, CEO Michael Dell told the press: "We are focused on data centers, services, software, servers and storage. Those are likely areas for Dell to use its capital for nonorganic growth ... If you look at the last few years at the acquisitions we have made, it really has been focused in those areas."

Cisco Systems recently announced it is entering the server space, creating new competition for Dell, and computer rival IBM is rumored to be in talks to purchase Sun Microsystems, which would considerably strengthen it.

To remain a strong competitor, is an acquisition imminent for Dell?

"There are a lot of rumors about that," Kay said. "Dell still has a pretty good cash position, and certainly could make a purchase. But there are not a lot of great companies floating around-look how much EDS cost [Hewlett-Packard]. That was really expensive."

Before the EDS acquisition, though, Kay points out, EDS had been a partner of Dell's, which left Dell with a hole on the IT services side. Kay suggests a company similar to ACS-a Massachusetts service and support company-could be a fit.

"I'm sure Dell is looking over acquisitions, and that that's a continuous activity for them," Kay said. "Though it's pretty reasonable to think Dell might be accelerating its interest in this area."

On March 24, Michael Dell conceded that the company was exploring "smaller-screen device," a thing many already suspected. In a research note on March 20, Kaufman Brothers analyst Shaw Wu wrote that Dell had already approached carriers with a smartphone design, which was turned down for its lack of differentiation in the marketplace.

Wu, too, said he imagined this put Dell in a position of likely planning to acquire some help. "We are being told that Dell is going back to the drawing board in designing the cell phone with more differentiation," Wu wrote in the research note. "This will likely involve vertical integration of some sort including software and/or services."

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