Quantcast
Latest Stories

Dell buyout highlights PC sector woes, say analysts



WASHINGTON – Dell’s plan to take the computer giant private offers an opportunity to return to its start-up roots, but won’t solve the fundamental problems facing the company and the PC sector, analysts say.

The Texas-based tech giant on Tuesday unveiled a $24.4 billion buyout deal giving founder Michael Dell a chance to reshape the former number one PC maker away from the spotlight of Wall Street.

Roger Kay, analyst at Endpoint Technologies, said Dell’s plan underscores the deep problems of an industry roiled by a rapid shift to mobile devices like tablets and smartphones, and away from traditional PCs.

“It’s an illustration of how tough the PC business is, that Dell had to take this extreme step,” Kay said.

Kay said that without the pressure of meeting quarterly financial targets, Dell can focus on more profitable PC segments as it tries to reinvent itself as a services and software company.

“Michael has been trying to turn Dell into a supplier of enterprise solutions for a long time,” said Kay. “He has pleaded with Wall Street to give him time.”

Kay told AFP that going private would make a transition easier by avoiding the spotlight of “ugly results” which could come from scaling back the PC business.

“The commodity PC business has been suffering,” Kay said.

“Dell may probably keep the higher margin consumer lines but maybe look at rest of the portfolio.”

Shaw Wu, analyst with Sterne Agee, said Dell has a difficult task ahead.

“Despite the company’s strong efforts to transform itself… we estimate that about 70 percent of its business is tied to PCs,” Wu said in a note to clients.

“On the positive, we believe going private takes the company out of the quarter-to-quarter grind of being a publicly traded company. But on the negative, not having publicly traded stock could make it more difficult to make larger, transformative acquisitions.”

Wu said that as a private firm, Dell’s cash would be needed to pay equity investors and service debt, noting: “We are not sure going private improves the company’s fundamental position.”

Darren Hayes, a Pace University computer science professor and former investment banker, said that by going private, “you’re not subject to a lot of regulation, you don’t have to answer to your shareholders, so maybe you can be more nimble in strategy.”

He noted that “Dell has struggled because of Apple and Lenovo, so this might be a way to trim costs and regain some ground.”

The computer maker, which Dell started in his college dormitory room, once had a market capitalization of $100 billion as the world’s biggest PC producer.

Dell is now the number three global PC maker, behind Hewlett-Packard and Lenovo, according to the latest report from market tracker IDC, showing Dell’s market share of 10.6 percent in the fourth quarter.

HP said in a statement that Dell “has a very tough road ahead” and “an extended period of uncertainty and transition that will not be good for its customers,” adding that HP “plans to take full advantage of that opportunity.”

Chinese maker Lenovo said it would not comment on a competitor but maintained that “we remain as always confident in our strategy, our ability to deliver compelling and innovative products and our overall position and performance.”

Rob Enderle, a tech analyst and consultant, said however that the deal suggests “tighter coupling of Dell and Microsoft,” which is providing a $2 billion loan toward the buyout.

“Surface was created because Microsoft didn’t think the (PC makers) were listening. Dell will now be listening and Microsoft is likely to listen to Dell better as well,” Enderle said.

“But the goal is to put Dell back in start-up mode… Both will target Apple and Google as a team which is where their combined power is likely to be made visible.”


Follow us on Facebook Follow on Twitter Follow on Twitter




Recent Stories:

This raging summer of ‘Priscilla’ queens 2 mins elapsed HEARD: Very villainy 2 mins elapsed Rain or Shine holds off Meralco, forces Game 3 23 mins elapsed Power Pinays yield to Japan in Asian Women’s Club volleyball 25 mins elapsed 19 Ukrainians, Russians, Filipinas rescued in bar raid 2 hours elapsed Caguioa blasts ‘no heart, soft’ Ginebra on Twitter 3 hours elapsed San Mig Coffee grinds out win over Alaska to force decider 3 hours elapsed Napoles tags over 100 officials in pork scam – Lacson 4 hours elapsed
Complete stories on our Digital Edition newsstand for tablets, netbooks and mobile phones; 14-issue free trial. About to step out? Get breaking alerts on your mobile.phone. Text ON INQ BREAKING to 4467, for Globe, Smart and Sun subscribers in the Philippines.

Tags: dell buyout , infotech , pc sector , problems



Copyright © 2014,
.
To subscribe to the Philippine Daily Inquirer newspaper in the Philippines, call +63 2 896-6000 for Metro Manila and Metro Cebu or email your subscription request here.
Factual errors? Contact the Philippine Daily Inquirer's day desk. Believe this article violates journalistic ethics? Contact the Inquirer's Reader's Advocate. Or write The Readers' Advocate:
c/o Philippine Daily Inquirer Chino Roces Avenue corner Yague and Mascardo Streets, Makati City, Metro Manila, Philippines Or fax nos. +63 2 8974793 to 94
Advertisement Advertisement
  1. Nokia to be named Microsoft Mobile
  2. Senator wants to probe PH slow Internet connection
  3. PH has slowest internet in Southeast Asia
  4. Facebook rolls out ‘nearby friends’ feature
  5. Facebook page launched to help people on Pag-asa Island kill boredom
  6. SC junks motions vs cybercrime law
  7. Did Deniece Cornejo lambast Vhong Navarro on social media?
  8. Judge in Apple v. Samsung patent trial fed up with smart phones in court
  9. Apple offering free recycling of all used products
  10. CFOs slowly getting tech-savvy
  1. Did Deniece Cornejo lambast Vhong Navarro on social media?
  2. PH has slowest internet in Southeast Asia
  3. Netizens seethe over Aquino’s ‘sacrifice’ message
  4. Mommy Dionisia sings ‘Riking Bull,’sends netizens ablaze
  5. Nasa’s moon-orbiting robot crashes down
  6. Tech company: Change passwords or suffer ‘Heartbleed’
  7. Judge in Apple v. Samsung patent trial fed up with smart phones in court
  8. Philippines may watch ‘blood moon’ online
  9. Facebook rolls out ‘nearby friends’ feature
  10. Smart phone apps and sites perfect for the Holy Week
  1. #RejectedBbPilipinas2014Questions flood Twitter
  2. Did Deniece Cornejo lambast Vhong Navarro on social media?
  3. Netizens fall in love with Crimea prosecutor Natalia Poklonskaya
  4. Mommy Dionisia Pacquiao scores, takes over social media
  5. Nude and so dangerous
  6. Mommy Dionisia sings ‘Riking Bull,’sends netizens ablaze
  7. Russia tries to curb Crimean prosecutor’s Internet fame
  8. Memes flourish after Pacquiao victory
  9. PH has slowest internet in Southeast Asia
  10. Netizens thank Capa for Lee arrest

News

  • Caramoan declared mining-free zone
  • Slain mayor uneasy with public display of firearms
  • Mt. Banahaw visitors down to only 3,000—DENR
  • Bicol tour offer: Almasor or Triple C
  • Bomb found in Cagayan de Oro-bound bus
  • Sports

  • Shakey’s V-League: NU tests Davao’s mettle
  • Kaya rips Army
  • Illam, Muntinlupa LL batters still unscathed
  • Zaragosa leads PH Am q’finalists; Quiban out
  • Rain or Shine holds off Meralco, forces Game 3
  • Lifestyle

  • Entering the monkhood a rite of passage
  • Haneda International Airport: A destination on its own
  • Wanted: Beauty queen with a heart that beats for the environment
  • Kim Atienza: At home with art and design
  • Life lessons I want to teach my son
  • Entertainment

  • HEARD: Very villainy
  • HEARD: Serious job
  • Story time on the road
  • Let a hundred creative flowers bloom
  • Agents of Ambush, April 24, 2014
  • Business

  • PH banks not ready for Asean integration
  • Stocks down on profit-taking
  • Banks allowed to use ‘cloud’
  • SMIC to issue P15-B bonds
  • Honda upgrades PH plant
  • Technology

  • ‘Unlimited’ Internet promos not really limitless; lawmakers call for probe
  • Viber releases new design for iPhone, comes to Blackberry 10 for the first time
  • Engineers create a world of difference
  • Bam Aquino becomes Master Splinter’s son after Wiki hack
  • Mark Caguioa lambasts Ginebra teammates on Twitter
  • Opinion

  • Respite
  • Bucket list
  • JPII in 1981: walking a tightrope
  • It’s up to us
  • Repetition
  • Global Nation

  • 19 Ukrainians, Russians, Filipinas rescued in bar raid
  • Filipinos coming home from Mideast must obtain MERS clearance – DOH
  • US Secret Service in Manila ahead of Obama visit
  • Palace thanks Estrada for successful HK mission
  • Hong Kong accepts PH apology; sanctions also lifted
  • Advertisement
    Marketplace