Some might see the privatisation of Dell as a step back. It is certainly true that Dell has remained some way off its aim to become a $60 billion company globally - but the company might find it easier to create the breathing space to restructure and commit to a long-term strategy without the quarterly financial rat race.
Dell has been targeting more margin-rich areas to secure long-term profitable growth but has seen limited success in some, namely services. This also meant it took its eye off the ball in some respects when looking at high-growth consumer (and commercial) markets such as tablets.
Dell also had to focus internally -- dealing with a plethora of acquisitions over the past few years focused on security, services, and software, in the main. While the investments helped the portfolio transform into a higher-margin collection of end-to-end solutions and largely match the set-up of the IBMs and HPs of this world, not all of the acquisitions have had an impact on the business.
Moreover, the company had to adjust from being mainly focused on the effectiveness of processes and logistics to owning and needing to develop IP for its products.
In terms of partners, the direct model has turned into a mixed model.
Frequent internal organisational changes have mixed up regional, country, product, technology, and company size responsibilities. These are testament to some of the internal management struggles and the complex environment. Putting these issues in the same pot, mixed up with the financial pressure, made life more challenging than it might have been.
Regionally and in some countries, Dell's performance has been more consistent in some areas, such as x86, but heavily skewed in others, such as storage, where significant success and market share is centred around very few countries -- although that also points to a good deal of opportunity in various areas if the successful approaches can be replicated.
Compared with the server and networking unit, Dell's storage business doesn't seem to be all that significant in size. Dell needs to aspire to grow further as an enterprise IT infrastructure provider to compete effectively against HP and IBM as well as all the converged stacks from various vendors, and storage plays a key role here.
This strategic course is well reflected by the multiple acquisitions in the field of storage systems and software that enabled Dell to build out its own capabilities rather than relying on EMC technology.
Despite a strong portfolio and long-term vision, Dell still commands only a single-digit share of the growing and highly lucrative EMEA storage systems market, projected to surpass $8 billion by 2015.
This private buyout provides Dell's new top management with the opportunity to take a step back and appreciate the situation and what needs to be done. Go-to-market structure, geographical coverage, and sales bandwidth must take centre stage, we believe.
Dell has maintained its strong position in commercial PCs and remains the number-two PC supplier, after HP, to businesses in Europe. The consumer space, however, is where Dell has been struggling for the past few years in EMEA and where the company continues to lag behind, particularly in terms of product innovation -- the key driver for the mobile device market today and the success of players at present.
This will also eventually weaken its positioning in the business space as boundaries blur -- BYOD is increasingly affecting the commercial client space.
Will the investment from Microsoft will translate into a stronger focus and increased investment in terms of innovation in the overall client computing space?
In fact, it could combine with Microsoft's own apparent hardware ambitions in its attempt to regain some share in the device and content management battle against Apple and Google. The alternative, much like in the printer space, is to divest these units.
One fascinating angle for analysts -- and for customers -- relates to Microsoft's direct investment. In EMEA and elsewhere, Dell and Microsoft have been working extremely closely in both PCs and servers.
The first three quarters of 2012 saw almost 300,000 Dell PowerEdge servers shipped for the Microsoft Windows Server OS, generating hundreds of millions of dollars for the ISV.
Dell shipped 10 million PCs in 2012. At the same time, Dell is a key supplier of datacentre technology and hardware to Microsoft when the former acts as a cloud service provider in Europe. Dell is arguably the leading supplier of servers and related maintenance services to hosters and public clouds in EMEA, so has significant influence on how Microsoft is seen in the region.
We believe that these interdependencies make the $2 billion loan from Microsoft reasonable. How and if the investment (relatively small on a total of $24.4 billion) will influence Dell's activity is unclear, but we would not expect any major change in the next 12 months.
Its future in imaging
Dell remains a minor player in the imaging market, one that has focused on the low-growth, do more for less segments aimed at SMBs and the home.
Dell relies on other vendors such as Samsung, Lexmark, and Fuji Xerox to provide the engine it rebadges. So it has been difficult for Dell to innovate in this area and it lags behind in new product features and integrated offerings.
Dell printers and MFPs are sold mostly in the sub-$200 price band where it competes against Samsung and HP.
Samsung has been more successful than any other vendor in penetrating the consumer market in Europe in a short time, using innovation but mainly aggressive pricing to gain market share, in direct competition with Dell, Brother, and HP.
Without capturing high volumes of pages through the sales of higher-end printers and MFPs, this strategy damages the profitability of vendors, as illustrated by Kodak's exit from the market and Lexmark's withdrawal of inkjet and the entry-level market. Dell has not paid enough attention to the high-margin potential that imaging products can bring thanks to the sales of bundled services and solutions.
Managed print services are growing at an average 20 per cent year on year in Europe -- while imaging hardware remains flat at best.
Overall, Dell has increasingly managed to scale up its visibility and impact in topics such as cloud and datacentre transformation. Dell's server business keeps growing and is eating away at the competition.
The key strategic topics Dell is covering - cloud, convergence, mobility, and data insights, presented at the Dell Technology Camp 2013 just last week - reflect the main talking points and in most but not all areas, the acquisitions, products, and solutions make Dell's approach real and not simply a talking point.
In EMEA, surveys support the emergence of Dell as a major cloud technology provider as well as one of the major strategic IT suppliers.
It continues to make good inroads in the service provider space and is using the acquisitions to position itself not just as a mobile device supplier but workforce management company (such as KACE), not just as a server/storage supplier but as a systems management and automation full service shop (such as Active Infrastructure based on Gale).
We still believe, however, that to make it to the higher-margin space, Dell needs to add the services component: consulting services to address clients' burnings issues and capabilities to design and implement the solution. Dell has these capabilities, albeit at small scale, in Europe, but it continues to see these as a "wrap" for the technology, not an integrated part of the "solution" itself.
Technology isn't a solution to anything until packaged and fitted to client needs, and the limited focus and success of services (apart from support) in Europe holds things back. Perhaps going private will give Dell a bit more time to rethink its European services and solutions strategy to make deeper changes in how it goes to market.
Company, customers, and industry have to wait 45 days for ratification of the buyout. At the moment, there doesn't seem to be another bidder or investment consortium on the cards with a better offer, so we will see very little action in the near term.
And that's probably a period that the company wants to move through as quickly as possible. The key to success now and in the future is Dell's focus on the customer and partners. Offering support and advice and building confidence will be key to Dell sticking around for the next 30 years.
Giorgio Nebuloni (pictured), Daniel Bizo, Karine Paoli, Mette Ahorlu, Arnaud Gagneux, and Thomas Meyer are research analysts at IDC
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