The Iconic Rise and Fall of Dell

After having served its global set of customers for years, today Micheal Dell’s organization stands at a crossroad of holding on to its legacy while embracing uncertain future.

Historically speaking, Dell has always traded in the discount basement of its peer group. Over the last five years it has consistently been last in valuation multiples vs. its peer group comprised of companies such as HP, IBM, Cisco, EMC and Apple.

However, experts in the industry say that Dell used to be one of the most efficient of large hardware suppliers and its model of reaching out to the end customers, the direct way, was pioneered by its founder himself. And yes the biggest strength of this model was that Dell could have easily aligned its R&D spend and encourage innovation to support growth initiatives.

In recent times, though, Dell’s top line growth has deteriorated steadily and although a real free fall has been averted, the overall trend surely remains on the down side. According to our understanding, Dell is still a great organization, but this is primarily happening because of a lack of differentiated product and services strategy.

And today, even though the company has a very significant enterprise business, many IT buyers have a perception towards Dell as low cost commodity. There is no doubt that the company has made efforts in recent past to restructure its sales channel for a better strategic sales approach, but the success of this structured sales effort has been largely isolated to a few geographic markets only.

Today there is no doubt that Dell is a company in serious strategic trouble with multiple negativities at work simultaneously in every one of its core markets – desktops, servers, and services. In its core desktop/laptop market Dell faces declining sales and lacks a compelling mobile offering of its own.

Even though the company has focused towards software, Dell’s efforts in software have not yet borne any meaningful fruit. Dell has recently abandoned any simulation of having a public cloud service and instead went towards focusing on cloud management tools. While that is a growth market, its small current size and lack of maturity may prevent Dell from monetizing this opportunity in a meaningful and timely fashion.

The road ahead –

Today, the Dell board needs to clearly assess chances for success and failure. An acquisition by Denali, or an acceptance of an offer from Carl Icahn or an alternative process with another potential suitor can surely move the company towards better profitability regime.