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IDG News Service - Dell's effort to move away from PCs into enterprise products has been slow as the company battles a challenging economy and tries to weave together acquisitions in a coherent manner.
Dell's legacy has been entrenched in the PC business, but in recent years it has focused on moving into the fast-growing enterprise segment to improve profits. Dell is pushing hot technologies like cloud and virtualization products to link its mainstay client and server hardware business to newer business areas such as networking, storage, services and increasingly, software.
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Dell's acquisition spree over the past few years has helped reshape its strategy. Dell spent US$4.9 billion on seven companies this year, with a marquee acquisition of Quest Software, which is the "foundational platform" for the company's evolving software strategy, said Brian Gladden, Dell's chief financial officer, at the Credit Suisse technology conference last month.
But while Dell seems to be making the right moves, analysts said it has been slow to pull together assets from the acquisitions to simplify product lines. Many of the acquired companies are operating independently and have unrelated products, which is hurting Dell's long-term plan to expand product sales. It could be years until such results are visible. Looking back at this year, analysts are also wondering how long it will take for the company to establish a cohesive software strategy around Quest, which offers a range of software for database management, data protection, virtualization, compliance and security.
A challenging economy also has customers tightening pockets and delaying purchase plans, which is an ongoing issue for Dell's integration efforts. Dell's revenue for the most recent quarter ending on Nov. 2 was US$13.7 billion, a fall of 11 percent compared to the same quarter a year ago. Net income also dropped to $475 million during the quarter from $893 million a year ago.
The company could be biting off more than it can chew with its dozens of acquisitions, but it is trying to expand its sales reach by bringing together a wide range of products, said Roger Kay, principal analyst at Endpoint Technologies Associates
"A transition like this is not easy, and inevitably there will be a period where the gap is glaring," Kay said. "It could take another five years for it to reach some kind of critical mass that will support the company's cost structure."
Dell in recent years has acquired largely profitable companies, with some offering complementary products and others pushing the company into new markets. In addition to Quest, other key acquisitions include services company Perot Systems, storage companies EqualLogic and Compellent, cloud company Boomi, systems management company Kace, virtual desktop company Wyse Technologies, networking company Force10 Networks and security company SecureWorks.
Dell's acquisitions are relevant to its strategy but the transition requires that the sales force be "re-engineered" to sell enterprise products, which can be harder than building new enterprise-focused products and services, said Matthew Eastwood, group vice president and general manager of IDC's Enterprise Platform Group.