With Buyout Set, Dell Needs to Lay Out PC Strategy, Analysts Say
Dell's buyout deal should give the company renewed business flexibility and stealth, but its customers need to know if Dell will be in the PC market for the long haul.
Tue, February 05, 2013
"Now, Dell will be able to better compete with HP, Lenovo, IBM and Cisco," said Patrick Moorhead, an analyst with Moor Insights & Strategy. "They can do what they want without the scrutiny of Wall Street and the SEC, and do it under the radar, making it harder for competitors to guess at Dell's next moves and then making defensive moves to thwart them."
However, whether Dell, the third-largest PC maker in the world, plans to continue to be a major player in the PC business is an open question. That question has customers - both enterprises and consumers - concerned.
"It's too early to tell how much Dell wants to remain in PCs," said Moorhead. "They could more easily reduce or exit the business as a private company... Dell customers, specifically business PC customers and channels, could be a little edgy until Dell announces it's in the PC business for the long haul."
Hewlett-Packard, which has been barely hanging on to its number one position in the PC market, used the news of Dell's buyout announcement to take a jab at its competitor.
"Dell has a very tough road ahead," HP said in a released statement. "The company faces an extended period of uncertainty and transition that will not be good for its customers. And with a significant debt load, Dell's ability to invest in new products and services will be extremely limited. Leveraged buyouts tend to leave existing customers and innovation at the curb."
The company went on to say that HP will work to pull in any customers who might be looking to leave Dell.
Dell announced earlier today that executives finalized a $24.4 billion buyout to take the company private. The deal includes CEO and founder Michael Dell's contributing cash and equity plus a $2 billion loan from Microsoft.
The buyout is expected to enable Dell, which has been a public company for about 25 years, to operate without shareholder and Wall Street pressures. The position could benefit Dell, which has been struggling in the past few years from a lagging economy and a PC industry increasingly under pressure from the popular tablet and smartphone markets.
"Escaping the noise of the market should allow Dell and the company's other owners to focus more on the signal of their long-term strategy," said Charles King, an analyst with Pund-IT, Inc.