The battle is over for Dell Inc. CEO Michael Dell to take the company private with a $25 billion buyout. Now he needs to win a war against a declining market for PCs and create a "new Dell" business model for the age of mobile devices and cloud computing.
Dell shareholders voted on Sept. 12, in favor of the proposal for Dell to take the company he founded private and buy 75 percent of the company with help from an investment by Silver Lake Partners, Dell said in an open letter after the vote.
"The forces of cloud, big data, mobile and security are changing people's relationship with technology, just as the PC did almost 30 years ago," Dell wrote. "Now it's time to do what Dell does best—make these innovations simpler, more affordable and more accessible, putting more power into the hands of more people than ever before. As a private company, we can move even faster toward our goal of becoming the industry's leading provider of scalable, end-to-end solutions that deliver extraordinary value for you and your organizations."
Sales of desktop PCs are declining with the rise of mobile technology that allows people to write from tablets and browse websites from their phones. Approximately 63 percent of cellphone owners and 57 percent of adults access the Internet using their cellphones, according to a study released on Monday by the Pew Center.
As a private company Dell will likely aim to design software that advances cloud computing services by giving businesses "new options on what to do with it," so they can build their own cloud computing infrastructure and get a quicker return on their purchase, says Leslie Fiering, vice president of the Mobile and Client Computing Team at technology research firm Gartner.
"It's hard to make radical change when you have to answer to Wall Street," says Fiering. "He is not going to save the company with a new gadget, but with a new business model."
Dell will continue designing new tablets with more of an emphasis on "user experience," including ergonomic design, flashy new looks, color and convenient pre-installed software, rather than adding new features to the devices, Fiering says. The PC business is "still a cash cow for the company," and the company will continue making new, smaller models of PCs, Fiering says.
"The question is not how you reinvigorate the PC business, because that ain't going to happen," she explains. "The question is, what does the new business look like and how do PCs fit in."
Consumer price and presentation are key challenges for a privately-held Dell. The company has been trying to make its products less costly to build, and the company will also have to create the marketing presence of a "new Dell," says Adrian O'Connell, a research director at Gartner.
The traditional part of Dell is largely centered on client computing, and 'new Dell' refers to the increasing area of enterprise solutions, including servers, storage, networking, software, services and security, says O'Connell, who is part of Gartner's Data Center Infrastructure and Management research group.
"To grow the "new Dell" business areas, Dell first needs to ensure that enough customers and prospects are aware of the capabilities that Dell has today, and don't just think of it as a PC provider." O'Connell says. "The bottom line though, is solidifying the 'old Dell' business areas enough so that the company is able to operate as effectively as possible to grow the 'new Dell' areas."
Dell has been positioning itself to make innovations in the software market with acquisitions including Wyse, a cloud client computing system that Dell bought in 2012, which has allowed the company to follow the trend toward cloud computing and unveil new virtual data center products in August, Fiering said.