Dell takes back the night in PCs

Even as the PC market declines, a private Dell is taking share.

Back in the old days, like a decade ago, everyone waited breathlessly for the quarterly PC market share statistics to come out. Fortunes were riding on it. Then Apple’s iPhone came out and upended the endpoint (Internet-access-device) business, and it’s been a while since most people cared much about PCs.

But fortunes are still riding on the PC market, despite its continuing to shrink. According to Gartner and IDC, worldwide unit shipments dropped by double-digit percentages in 1Q16 to less than 65 million for the first time since 2007.   And yet, this mature market represents something like $30 billion in quarterly revenue, quite a respectable pile and enough to feed plenty of families.

Within the overall dreary landscape of last week’s published results, however, was this hidden gem: Dell has once again risen to the top of the heap in U.S. PC shipments. “What!?” you say. “If PC shipments are boring these days, then Dell’s PC shipments are ‘I don’t care’ squared because Dell is a private company, and if I can’t trade the stock, then really what’s the point?”

Be that as it may, it’s still an interesting result because the timing of Dell’s steady — if relative — rise over the past 13 quarters corresponds closely to the “go-private” transaction. The privatization deal completed in 4Q13, and here we are 2Q16, 13 reported quarters later. According to Gartner data, Dell began to take share in 1Q13 worldwide:

dells y on y share change in ww pc unit shipments Gartner

and 2Q13 in the United States:

dells y on y share change in us pc shipments Gartner

and has done so every quarter since.

And that share gain is in striking contrast to the 13 previous quarters, during which the company mostly lost out to rivals Hewlett-Packard (HP) and Lenovo.

So, what is this magic formula that seems to correspond to the firm’s going private? Well, sources within Dell believe the good fortune is the result of a combination of factors:

Lack of distraction

Without having to please Wall Street every 90 days, the product and marketing teams are able to stay focused.

Steady investment

The respite from the 90-day shot clock also allows persistent investment, which keeps product and marketing initiatives humming along smoothly.   

More sales people

The company has added thousands of new sales people, who are driving growth through additional and new account coverage.

Product line

The overall investment strategy has produced a solid product lineup. I have been testing demo XPS 13 and 15 as well as Alienware 13 and 15 systems, and I can tell you they are sweet. While the premium XPS and Alienware systems represent the leading edge, yeoman Latitude, Inspiron, OptiPlex, and Precision systems represent the bulk of Dell’s unit volume.

Rivals’ missteps

An analysis of Dell’s success factors would not be complete without pointing to an exogenous contributing factor: screw-ups by HP. Dell’s rival has provided a number of openings over the past several years as the former champ has gone through reorganizations, spinouts, and executive shifts.

Pricing power

Unmentioned by Dell, but still likely a factor is the ability of the company to price its products with more refined control. Since it doesn’t have to show profitability to Wall Street on a regular basis, the company can lower prices in selective competitive situations and accept lower margins temporarily. A public company would be punished for sacrificing margin for share.

It’s pretty obvious from the data alone that going private has given Dell’s PC business a big boost. Being able to operate away from the spotlight has multiple advantages in maneuverability, stealth, and consistency. But at bottom, the company is able to stay focused on its customers and products because its shareholders — Silver Lake and Michael Dell — represent patient money.

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