Dell 3.0: “Been There, Done That!”

AUSTIN: Dell World 2014 kicked off yesterday and today made a number of product announcements under what it calls the four customer imperatives: connect, inform, transform and protect. They involved a variety of opportunities, highlighting the private company’s versatility and big-time ambitions. In addition to a new converged infrastructure solution, the , the company announcements included: , ; an entry-level all-flash storage array starting at $25,000; and a Network Functions Virtualization (NFV) initiative with and .

In a press briefing on Tuesday Michael also outlined his company’s recent successes:

-was the No. 1 storage solutions provider in the first half of 2014;

-maintained its No. 2 share position in the global x86 server market;

-the software division registered double-digit revenue growth year-over-year;

-PC shipments grew by nearly 10% year over year in Q3

-Gartner ranked it No. 1 in Worldwide IT Services for Healthcare Providers; and,

-it delivered year-over-year growth across every region globally.

It’s been just over a year – October 29, 2013 – since Mr. Dell succeeded in buying his $57-billion (2013) company for $25 billion (75% of it; the rest going to private equity firm Silver Lake) and launched its third iteration: founded in 1984; went public in 1988; and now privately held. In a recent interview he said he went public “because we needed the capital, and we needed to be known.” However he didn’t care for a life under the eyes of Wall Street. “Been there, done that.”

Following the Dell annual analyst conference at the end of May Technology Business Research concluded that the company had ‘successfully transitioned to operating as a private firm, that its strategy remains largely unchanged from a year ago and that the corporate culture is optimistic and energized about building the new, solutions-oriented Dell.’ It identified five challenges to the success of the strategy, all largely tied to the go-to-market execution:

-market awareness of the breadth of Dell’s portfolio;

-customer permission to play in Dell’s noncore markets such as software and services;

-portfolio integration and evolution to fully address opportunity and create new markets;

-direct sales maturity and capacity, and transactional swim-lane management of the nearly 18,000 generalists to sell the portfolio; and

-continuing channel, alliance and partner expansion and maturity as Dell accelerates revenue growth and expands addressable markets.

In August TBR analyst Krista Macomber noted that Dell’s corporate revenue were estimated to have risen 5.9% year-to-year to $15.4 billion during 2Q14 and operating margin improved 180 basis points to 3.7%, and that its recovering hardware business will help corporate revenue grow 10.2% to $15 billion and operating margin rise 180 basis points to 3.3% in 3Q14. ‘However, TBR believes challenges, largely tied to go-to-market execution, will continue to hinder the success of Dell’s corporate transformation.’

Bloodied competitors – victims? – of the cut-throat commodity PC and x86 server markets, Dell and HP have clashed frequently. When Dell was engaged in a bitter battle to go private last year HP said its archrival had “a very tough road ahead,” and said that it would “take full advantage” of the opportunity presented by the disruption to Dell’s business. And two weeks ago CEO Meg Whitman said Dell’s failure to follow through on a pledge to turn over 200,000 accounts to channel partners is the kiss of death.”

With HP recently announcing it planned to split its company into PC/printer and enterprise businesses, it was Dell’s turn to return the love.  Last week Dell CFO Thomas Sweet said the planned split up could create confusion among its business clients, giving his company an opportunity to grab market share,

“The confusion and uncertainty creates opportunity,” he said. This follows Michael Dell’s comments that HP would be distracted by the split and there would be “chaos” in the separation.

Charles King, Principal Analyst, Pund-IT, believes today’s announcements offer some insights worth considering about Dell 3.0, demonstrating how the company continues to leverage its legacy strategies to good effect. “The entry flash system shows that the company still has its chops together in terms of market analysis and timing. Though it’s obviously aimed at higher end systems, the core vision underlying FX is similar to the penchant Dell has always had for developing/delivering products that are highly flexible and easily customizable. The boldness of the FX design might also be traced back to the company’s shift to private ownership. Pursuing a course this radical and potentially risky is likely far easier for a privately held company than one whose strategic decisions are publicly second guessed and/or criticized by activist investors.”

While both Dell and HP have their challenges ahead of them, that’s true of any business, especially an IT-focused business. Of course, with those challenges come opportunities, and while they are taking different approaches – addition and subtraction – their fates lie largely in their own hands, and who could ask for more?

DISCLAIMER: Dell paid for airfare and accommodations, and I do provide the occasional writing services to the company.

Author: Steve Wexler

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