Hewlett-Packard-Zombie
HP is preparing to dine on the flesh of a still-living victim:
In the wake of Dell’s $24.4 billion buyout announced Tuesday morning, HP put out a statement taunting its rival by noting that the company “faces an extended period of uncertainty and transition that will not be good for its customers” while also vowing to capitalize on Dell’s misery by swooping in to snag its old customers.
“We believe Dell’s customers will now be eager to explore alternatives, and HP plans to take full advantage of that opportunity,” HP wrote.
That’s to be expected, of course. But if I were Michael Dell, I’d be more worried about Greeks bearing gifts:
Once the sale to a group of investors that includes investment firm Silver Lake is finalized, Dell’s stock will stop trading on the Nasdaq nearly 25 years after the Round Rock, Texas, company raised $30 million in an initial public offering of stock. Microsoft Corp. is investing in the deal with a $2 billion loan.[Emphasis added, natch]
Of course, MS also once investing $150 million in a dying, nearly forgotten company called Apple Computer, and that turned out pretty nicely for all concerned. MS even made a tidy profit off the deal. But that was during the Bill Gates years, and Steve Ballmer’s advances shouldn’t always be so welcome.
The question remains what Dell can accomplish as a privately-held corporation that it can’t do with a bunch of noisy shareholders. Brad Chacos explains:
All-in-all, the company’s newly private status likely won’t change much for everyday users in the short term. Dell will continue making computers and restructuring the company to focus more heavily on the enterprise market, just as it has been doing for the past several years. That reality may not be “sexy,” but it is a huge deal for Dell and the Windows ecosystem alike—and the substantial investments of Silver Lake, Microsoft, and Michael Dell himself guarantee that future will occur, Wall Street whims be damned.
Short version: Dell gets some breathing room, away from the demands and expectations of Wall Street, which is clearly drunk. (Gays have better gaydar; I have better drunkdar.) But what Dell doesn’t get is breathing room from the marketplace. They’ll also get a heaping load of new debt.
If Michael Dell manages to turn this thing around, it will become the stuff of legend.
Dell = RIM. Probably with the same eventual result.
“Duke it out with IBM in the server market” doesn’t seem like a particularly viable direction to take. Granted, it’s slightly better than the consumer market.
typo: “…I’d be more worried about geeks bearing gifts”
But seriously, while Dell probably has to shrink, it’s a major player along with Lenovo, IBM, and HP in the enterprise space. I don’t just mean servers, either. Tablets have stolen so much of the consumer market that we’re back to the workstation/PC divide like we used to have. Workstations are for the folks that just have to have their project management software, Outlook, big spreadsheets, engineering tools, etc. That market is going to remain pretty darn big and Windows has the bulk of it.
And really, that’s the biggest problem with Windows 8. They’re trying to shoehorn the workstation market into a consumer interface, and a poor consumer interface at that.
Dell is currently a finance company selling loss-leading “PCs” and marginally profitable servers.
IMHO, they’re going private to try to avoid the public slaughter of a 50% margin drop or more while trying to detox from their short-term credit exposure. If they can lock their long-term financing in at below 3 percent, and if the server market doesn’t go to Torment in the next two years, they just might succeed.
I don’t know if they can pull off selling the Dell PC brand off to a chinese company like IBM did to Lenovo, but if you can, sell. If you can’t, just stop. Step 1 is “no more workstations”. Ditch the workstation market entirely; there is no profit and no leverage left there.
Next, you have to dry the server market off of the crack of financing. Take every loan and lease on the books, and sell them to some sucker in the financing world. Then, from this day forward, you’re selling for a profit only, and allow someone else to run the leases.
Third, no more loss leaders. If you can’t make a profit on a deal, DON’T make it. Your customers have become too smart to buy everything from you because you gave them 100 PCs the first time.
The final, and most controversial step: you commit 100% to storage. Either get EMC to buy you, or buy LSI’s storage wing. Data storage is where the server world will revolve; use CPUs and memory to sell your disk.
I personally suspect that Dell would get more bang for his buck in just selling Equilogic to LSI or EMC (or even IBM) and then cashing out, but if you’re going to go, go BIG.
This is a bold move. And I agree Steven, Michael is playing for his legacy here. I’ll enjoy watching it play out.
In some ways, it’s similar to Jobs coming back to Apple after the “suits” era.
Sometimes I have to pinch myself at the luck of having a front row seat to all of this.
Oops, missed the V and PH thing again. Sorry Stepehn! You’d think after 11 or 12 years, I would have this figured out….
Jesus H, I give up…..
What the hell. Don’t miss this tonight!
http://venturebeat.com/2013/01/31/silicon-valleys-pioneers-gather-for-screening-of-pbss-american-experience-documentary/
“I’d shut down and return the money to the shareholders.”
My bold prediction? April 2014, “Dell who?”