COMMENT ON A TWEET #7

COMMENT ON A TWEET #7

Matt HealeyTuesday,22 January 2013

The Snap:

Tweet: “@cborovick @MrsYisWhy: Dell close to $22bn leveraged buyout amid decline in PC market | Technology | The Guardian http://t.co/CeCco8Og

The Download:

A while back I was on a call with an IT industry analyst. He had a very interesting comment. His feeling was that the IT outsourcing industry was about to go through a change as significant to services as client/server was to the traditional mainframe architecture. What is driving this is the move to the Cloud. This will obviously have an impact on the services vendors like Accenture, IBM Global Services, etc. Some will survive, some will not. But this transformation will also have a significant impact on the traditional server vendors like Dell. The value in the server market is migrating from the hardware to management services and software. Dell is lacking in this area, and as a result, they are at risk of being commoditized in the server market. Dell’s traditional advantage — cost — will not hold up as the SMB migrates to cloud services.

The other problem for Dell is the migration to a PC plus environment. The PC is declining in sales. Several years ago the only solution for some common tasks like email, web, etc. was the PC. This was overkill as the PC was more powerful. However, with the advances that vendors like Samsung are bringing to the market, these tasks can now be better completed on a tablet or a smartphone. All of these things put Dell’s future growth in question despite the fact that they can continue to generate cash. This makes this the perfect company for private equity because as I discussed here, the markets demand revenue growth, which Dell currently is not is a good position to deliver.

Hat Tips:

Image Credit: Wikimedia Commons

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  1. […] have written about this before. I think this is a good development for Dell, which is not in a position to be a public company […]

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