Dell "No Longer a PC Company" as It Focuses on Enterprise
February 27, 2012 2:07 PM
comment(s) - last by
Dell will still devote energy to its XPS lineup
Dell, a company that rose to prominence on direct sales to customers, lean operations, and competitive prices is moving its focus away from the PC market. According to
, this revelation comes courtesy of Brad Anderson, Dell Solutions Group President.
"We're no longer a PC company, we're an IT company," said Anderson. "It's no longer about shiny boxes, it's about IT solutions [that let companies drive efficiencies]."
killed off its netbook lineup
in late 2011.
Dell experienced record growth in its enterprise solutions and services divisions with $18.6 billion in revenue for fiscal 2012 ($4.9 billion for Q4). Revenue from its consumer unit dropped 2 percent for Q4 to $3.2 billion.
also reports that enterprise solutions represent 50 percent of Dell's profits.
Not surprisingly, the signs that a move away from PCs was right there in the company's earnings report. “Our customers think of Dell in much broader terms now, trusting us with their comprehensive IT needs, from the datacenter to the device,” said CEO Michael Dell last week. “The expanding mix of revenue and earnings from enterprise solutions and services is critical to our future."
According to Anderson, Dell will still devote energy to its XPS family of PCs that have been successful for the company.
Rival Hewlett Packard
pondered such a move last year
, but new CEO Meg Whitman
decided against tossing asides its PC unit
. "HP objectively evaluated the strategic, financial and operational impact of spinning off Personal Systems Group (PSG)," said Whitman in late October. “It’s clear after our analysis that keeping PSG within HP is right for customers and partners, right for shareholders, and right for employees. HP is committed to PSG, and together we are stronger."
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2/27/2012 5:38:29 PM
The question though is how reducing focus on the "core" product may affect their "growth" sectors.
Its one thing to declare your going to "focus" on only high margin areas of your business... but this can ruin your high margin areas when they are dependant on your core services. For instance, I would say Dell made a business being a one-stop IT provider with the low cost of PCs/Laptops being the "hook" that got them into the door at alot of places. They may discover thier high margin IT contracts disappearing if the end customers find a better business computer supplier.
2/28/2012 10:14:25 AM
That is a good point.
This EXACT change has been done before, by many companies.
DEC had a consumer level PC business and then decided to focus on enterprise only. So did Sun.
But the real comparison goes to IBM. The founder of the modern x86 PC, at one time the largest retailer of consumer level PCs. When margins shrunk they divested their PC business. Then divested their laptop business to Lenovo. Finally, they removed themselves from the typical server market. IBM now concentrates on providing "IT Solutions" to only enterprise customers. Custom blade servers and mainframes are all they do now with hardware. It's a very high margin business, but also lower volume.
Much of IBM's name recognition is starting to erode though. There's a lot of IT guys who aren't thinking IBM first anymore. It's now Dell for a lot of mid-range enterprise solutions. But if Dell's name starts to fade, they could be facing a similar diluting of their brand as IBM.
2/28/2012 11:30:09 AM
I didn't see anything in the announcement or this article to indicate that Dell is absolutely not going to resell PC's. They may, for instance, merely stop selling them to consumers at Best Buy/Walmart/online, and instead sell mobile and desktop workstations directly to business as part of an "enterprise IT solution".
My guess is that they're primarily wanting to get away from selling $300 laptops, etc.
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