1. Dell’s Future Beyond
the PC Business
MOT 5223
James Groh ● Stuart Bankey ● Ryan Zapata ● Daniel Montemayor

2. Overview of Industry
Industry Background:
• The industry is highly concentrated, with the four largest companies
controlling 79.9% of industry revenue. During the five years to 2011,
fierce competition has made computer manufacturing an increasingly
commoditized business.
• Despite declining revenue,
domestic demand for computers
has increased during the past
five years highlighted by the
increasing proportion of
Americans that own computers.

3. Industry Life Cycle

4. Competitors Position
The industry is highly concentrated, with the four largest
companies controlling 79.9% of industry revenue. Major
players have been extremely aggressive in acquisitions
during the past five years, and IBISWorld expects further
concentration of industry revenue in the future as these
acquisitions continue.

5. Overview of Dell
Dell has shifted its strategy toward higher margin products. For
instance, Dell is expanding its enterprise solutions and services,
which include servers, networking, storage and related services.
To achieve growth in this
category, Dell expects to
leverage its existing customer
base, partner with other
companies and invest in
strategic acquisitions.

6. Dell’s Leadership
Michael Dell built this company in the personal computer
business. The company has changed considerable, especially
since Michael Dell returned as chief executive in January 2007.
“A lot of people think of
Dell as what it was five
or 10 years ago, but
we’ve moved much
more into the core of
information technology,
into the data center.”

7. Problem
• What is the problem?
– “Just a PC company.”
– How to expand into services for mid-sized
businesses?

8. Problem
• Root Cause
– 2005 stock price drop.
• $40.29/share to $30.64/share
• Continued to drop in 2006 ($26.16/share EOY
2006)
– Lost #1 title to HP
– Customer service problem

9. Problem

10. Problem
• Root Cause (conti.)
– Lost #1 title to HP
– Customer service problem

11. Problem
• Turning Point
– Mr. Dell’s return as CEO in January 2007.
• Controlling Points
– Focus of company
– Current and future product portfolio

12. Problem Summary
• Dell was number 1 but lost it shortly
after Rollins took over.
• Michael Dell returned and
determined the company’s difficulty
were are result of the lack of
services.

13. PC Vendor Unit Shipment
Estimates 4th Quarter 2011
Company 4Q11 4Q11 4Q10 4Q10 4Q11-
Shipments Market Shipments Market 4Q10
Share Share Growth
(%) (%) (%)
HP 4,137,833 23.1 5,598,619 29.4 -26.1
Dell 4,020,549 22.4 4,210,000 22.1 -4.5
Apple 2,074,800 11.6 1,718,400 9.0 20.7
Toshiba 1,925,100 10.7 1,968,091 10.3 -2.2
Acer Group 1,756,838 9.8 1,982,477 10.4 -11.4
Others 4,014,644 22.4 3,583,418 18.8 12.0
Total 17,929,764 100.0 19,061,005 100.0 -5.9

14. iPad eats PC market share
• Improvements to the iPad turn it into a
potential PC replacement for more and more
people.
• More powerful chips mean more
sophisticated aps can reside on the iPad.
• The iCloud should make the iPad's limited
storage capacity less relevant.
• Built in LTE makes the tablet an attractive
alternative for travelers who don’t want to
hunt for a Wi-Fi hotspot.

15. Reaction to Problem
• Since 2007 Dell has grown by both increasing
its customer base and through acquisitions.
• Dell has expanded into new markets. Most
notably business services.
• As of February 27, 2012, 47,000 out of Dell’s
110,000 employees work in business services
• $7.7 billion a year business and about 12% of
total revenue.

16. Dell’s Server Division
• One notable acquisition was of Perot
Systems, in 2009, which had a large
health consulting and services business.
• Dell is now the #1 provider of health
technology services
• The company stores more than 4 billion
medical images in its data centers, so
hospitals do not have to grapple with that
chore on their own.

17. Dell’s Server Division (cont.)
• In addition to acquiring companies. Dell
has innovated.
• Server customers have many diverse
choices and often cannot afford
comprehensive upgrades.
• Therefore, Dell’s products must work with
all kinds of new and older networking and
data storage equipment.

18. Dell’s Server Division (cont.)
• Dell servers run at 5 watts (about as much
as a night light).
• They manage internal temperature, since
a machine’s cooling fans use more power
than anything else.

19. Midsized Businesses Services
• Michael Dell believes the big potential
market is offering services to midsize
businesses, typically companies with from
a few hundred to a few thousand
employees
• According to him, Rivals I.B.M. and
Hewlett-Packard, have a more costly
business models aimed at large
corporations.

20. Midsized Businesses Services (Cont.)
• On February 10, 2010 Dell acquired KACE
Networks, a leader in Systems
Management Appliances.
• Dell stated it was buying KACE to expand
its systems management offerings to
better address IT administrators in mid-
size organizations.

21. Midsized Businesses Services
(Cont.)
• Support Services
• Configuration and Deployment
• Cloud and IT Management
• Business Continuity and Protection
• Training Services

22. Our Evaluation of Dell’s case
• Do we agree with the Dell’s decision to evolve
into more of a services company?
– YES!!!
– Helps diversify its business
– IT industry is evolving; get with the program…
– Maintain their “affordable and efficient” tradition
– Affordable & Efficient Hardware + Service = $$$
+ =

23. Our Evaluation of Dell’s case
• What would we do to remedy the problem
at hand?
– What problem?
– Dell already in most midsized datacenters
– Service via cloud or data center management
– Develop a sound market strategy
– Continue to appeal to medical information
record management organizations

24. Our Evaluation of Dell’s case
• Breakdown on their decision
– Dell is trying to be recognized as
more than a hardware
– Already has a foot in the
datacenter door with their
hardware
– Continue to appeal to midsized
datacenters
– Companies may look to Dell for
both hardware and service needs

25. Our Evaluation of Dell’s case
• Competition?
– HP, IBM and other IT service support
organizations.
• IBM – “Building a Smarter Planet”
• HP – Has HP Services division in government market
• Harris IT Services (My Company)
– Division of Harris
• Has numerous IT services support contracts
– Medical & Dental
– Commercial and Government Sectors

26. Our Evaluation of Dell’s case
• What if we were against the services
initiative?
– Dell may have lost out on millions if not
billions
– Could have filed for bankruptcy

27. Our Evaluation of Dell’s case
• Remember, “If there is a will there is a
way”
– Don’t overlook these IT giants evolving their
business into service oriented businesses
– One multi million dollar service contract can
make a difference

28. Our final thoughts…
• Dell will need to market themselves as a
reputable service leader
• Focus on IT service for midsized
businesses
• Continue going after medical IT market
• Perhaps price leverage their hardware and
service into an affordable bundle plan
• Spend a little now to continue making
billions…

29. Sources:
•http://bits.blogs.nytimes.com/2012/02/27/dell-is-hoping-its-more-than-a-server-company/
•http://bits.blogs.nytimes.com/2011/05/02/dells-future-beyond-the-pc-business/
•http://content.dell.com/us/en/business/smb-services.aspx?c=us&l=en&s=bsd&~ck=mn
•http://www.zdnet.com/blog/btl/dell-acquires-kace-expands-systems-management-to-mid-size-
business/30687
•http://blog.chron.com/techblog/2012/01/pc-makers-see-their-markets-shrink-while-apples-grows/
•http://www.slate.com/blogs/moneybox/2012/03/07/apple_gunning_for_pc_market_with_new_ipad.h
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