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New Dell won't abandon the PC

New Dell won't abandon the PC

Post buyout, the company can push into the high-margin products and services business without Wall Street meddling, Michael Dell says.

Dell will continue making acquisitions and will remain committed to its struggling PC business once its $24.9 billion deal to go private is complete, according to company officials.

The long, twice-delayed purchase of Dell by CEO Michael Dell and investment firm Silver Lake Partners was finally approved by shareholders earlier this month. Once the deal closes, likely by Nov. 1, Michael Dell will hold a 75% stake in the company he founded in 1984.

As a private company, Dell will be able to recapture the "entrepreneurial spirit" of its early days and more effectively execute a strategy of moving heavily into the high-margin products and services business without pressure from Wall Street, Michael Dell said.

Dell's post-buyout plan emulates the strategies of publicly held companies like IBM, Hewlett-Packard and Oracle, which package software, hardware and services into integrated offerings.

The new owners also plan to invest heavily in research and development, expand the sales staff, broaden the scope of partner programs and expand the company's presence in emerging markets, according to Michael Dell.

But company officials also vow that the personal computer will remain a core part of the business, dismissing reports in recent years that Dell was planning to exit the market where it got its start.

"We will continue to make large investments in R&D in enterprise solutions and services," said Chief Financial Officer Brian Gladden, but then quickly added, "By no means is that a statement of our lack of commitment to the PC business."

It's not clear whether the company must significantly cut costs to pay for those investments -- and Gladden didn't offer many specifics, saying only, "We balance the need for productivity in our business."

While Dell officials repeatedly affirmed the outline of their post-buyout strategy, Forrester Research analyst David Johnson said he still expects some changes over the next few months.

"Software is going to form a much more important part of Dell's business in the future," Johnson said. "Dell is in a position right now to be able to blend a really good hardware business with good enterprise traction with a growing software business, and build new types of converged systems."

Dell's software strategy will likely focus on areas such as virtual computing and applications for healthcare, he added.

Other areas of focus likely include high-end computing and converged systems that would run ERP and CRM software from vendors such as SAP and Oracle, Johnson suggested. He said it would be risky for Dell to buy a major business software vendor. "They don't have the core expertise in running enterprise application software business," he said. "You can't just acquire that."

Jeff Kaplan, an analyst at ThinkStrategies, said the vote to go private "puts a lot of the uncertainty behind the company" and places Dell on firm footing to pursue its strategy.

The uncertainty has been driving potential customers away, Kaplan said. "We've seen a dramatic decline in demand for Dell's services," he said. "The sooner they can pursue that strategy, the better opportunity they have to succeed."

Kanaracus and Shah are reporters for the IDG News Service.

This version of this story was originally published in Computerworld's print edition. It was adapted from two stories that appeared earlier on " Dell Goes Private as Shareholders Approve $24.9 Billion Deal" and " Dell to Continue Acquisitions, Remains Committed to PCs After Going Private."

Read more about government/industries in Computerworld's Government/Industries Topic Center.

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