In a week and a half, Dell will announce its second-quarter earnings results. Expect a bloodbath. In the first quarter, back in May, Dell gave the market a goose egg — analysts had expected Dell’s revenue and earnings to fall from a year ago, but the company slumped way worse than people were guessing it would. Shares tanked, and they haven’t recovered. Analysts aren’t expecting anything stellar this time — Dell said its outlook was weak — but I suspect Dell could deliver another shock, presenting numbers that will begin to confirm a permanent downward trend.
To begin with, the obituary is silly based entirely on the narrow premise of their performance in the post-PC era. Even though Dell made its entry into business with consumer focus, it is slowly transitioning itself as an enterprise player. Any analysis that doesn’t include a peek into their enterprise strategy is shortsighted at the best. Enterprise business may not be sexy but it is where big money is. It is premature to write Dell’s obituary without them failing to take off on the enterprise front. No, I am not claiming that Dell is going to succeed in the enterprise market but writing an obituary based entirely on consumer business is not right. Plain and simple.
Dell’s enterprise strategy revolves around servers, software and services along with some big data play. Unlike the leading enterprise players like IBM, HP, Oracle, Cisco, etc., Dell is taking a more open (as in non-converged play) approach to infrastructure. From the beginning, Dell is positioning themselves as someone who could offer solutions that doesn’t require you to dismantle existing infrastructure. The acquisitions in the last 2-3 years clearly indicate their move towards software play and their recent acquisition of Quest software is an indication that they are more interested in focussing on servers and the software on top of it than building tablets and smartphones. As enterprises move more and more into cloud and look at commodity hardware as their underlying infrastructure in the future, Dell has a good chance of making a strong play (provided if they execute it right). Their recent partnerships with big data players is an indication that they see the commodity hardware based big data world with hope and depending on how they move forward in the coming months and years, they can emerge as a credible contender in the big data market. Servers, Software and professional services are going to define Dell in the coming years and not PCs, Tablets and Smartphones.
Having said that I would still save the obituary as a draft and not delete it. They need to present a coherent picture of their vision for the future. Right now, it is confusing at the best. If we just take cloud infrastructure services segment, they started off with an Azure appliance strategy and now they are double dating both VMware and OpenStack. I am not saying they cannot succeed with the dual strategy but lack of a big picture on their strategy is hurting them more on the punditry and PR side. If they let this confusion thrive, it can come back to bite them big few years from now. They have all their pieces needed for a competitive play in the future but they need a strong vision from the top that clearly articulates where they are going in 6 months, 1 year, 2 years, 5 years, etc..
Disclosure: Dell invited me (along with many analysts and thought leaders) to the Future of Cloud think tank they organized with VMware at San Francisco in May. They covered my travel and stay for the event.