This guest post was contributed by Asif Shaik.
Earlier this month, Dell has announced that it has gone back to being a private organisation after Michael Dell successfully managed to finalise the acquisition. Dell has had a horrid time over the last few years, and was one of the few manufacturers that did not get on to the tablet bandwagon early-on. This time around, Dell is looking to not make similar mistakes and emerge itself as a consumer focused organisation that churns out innovative products.
Details Of The Acquisition
The Dell acquisition as finalised at $24.9 billion and it has been stated that shareholders will get $13.88 for each stock they hold. The main reason for delisting itself from the stock market is to gain more time to focus on the direction to take in the long run. Now, Dell does not need to worry about quarterly stockholder meetings and earnings calls. While this buys the organisation much-required time in the short time, there is still the small matter of figuring out future strategies.
What Does The Future Hold?
Dell’s PH Ferrand mentioned in an interview during the acquisition that while the mobile market is an alluring one, Dell does not intend to make a mobile device anytime soon. The last time it tried with the Streak series, it has failed miserably. So it is understandable that the organisation does not want to venture into this field in a hurry. Instead, it has been mentioned that Dell will redouble its efforts in the IT industry. Ferrand said that the IT market accounts for over $3 trillion yearly and that Dell’s stake in that market is only 2%. Dell’s first objective is to consolidate its foothold in this market.
Another area that Dell will be looking to enter is the cloud segment, which sees the likes of VMware, Amazon and IBM. Dell recently acquired Gale, an organisation that made cloud automation tools. Getting into the cloud would actually be a huge boost to Dell’s business, as it can augment its hardware offerings by giving customers robust cloud services.
Dell is allegedly also looking into building data centre utilities and big data products. This is usually a category that is heavily targeted by the likes of IBM, but Dell is looking to gain a foothold by launching affordable servers that feature ARM processors.
And Dell also looks to invest heavily in research, an area it has not significantly contributed its revenues to in recent years. Michael Dell said after the acquisition that focus will be on innovation and research going forward, and that more research centres would be established around the world.
While Dell may not gain much from launching a mobile device, one segment it needs to launch products in is the tablet category. Tablets are the single biggest contributor for flagging sales of traditional notebook vendors, and it looks like the form factor is here to stay. Many established notebook vendors like Dell and Acer failed to see the change early on, and as a result suffered significant losses in review over the last five years.
Dell needs to address this issue head-on and launch a few tablets that can match offerings that are available in the market today. And it is a tough ask. Amazon is currently selling tablets in the Kindle line, like the 7.0-inch Kindle Fire HDX for $229, and for that amount the tablet comes loaded with high-end features. Google’s latest tablet, the Nexus 7 2013, is similarly loaded with high-end hardware and costs $239. For Dell to mount a challenge to these tablets, it needs to create a product that has the best hardware available combined with unique services.
Furthermore, Dell can take a leaf out of Amazon’s book and undercut the pricing of the tablets. Amazon loses money on tablet hardware, but manages to recover its losses through content distribution. While Dell does not have a content delivery system, it can instead offer secure cloud services.
Dell also needs to maintain its notebook division, the one which contributes a major chunk to its bottom-line. Dell laptops traditionally have been known to offer consumers a great set of features at an affordable price, and it needs to continue making such products. While consumer interest in notebooks has gone down, there has been a surge in the sales of tablet notebook hybrids, a segment in which dell has many wares available.
For now, Michael Dell has secured Dell’s future in the short term through the acquisition. Only through continued innovation and product launches can the manufacturer see sustained growth, and it looks like Dell’s focus will be in this area.