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The future of Dell
This is my site Written by Dan Fletcher on February 6, 2013 – 1:58 pm

Dell announced yesterday that Michael Dell and Silver Lake Partners (along with help from Microsoft) are going to take Dell private in 2014.    Assuming that it comes to pass, and they go private in this 24 Billion dollar deal, I have a few predictions to make.

1) Dell will attempt to make another entry into the mobile and tablet market.   They have tried in the past, but it has been half hearted.   I don’t predict on whether they will be successful or not.   I do however believe that their deal with 2 billion from Microsoft makes it likely that their play for this market will not be a linux/Android attempt.  They will tie it with Microsoft I assume.

2) They are going to further push for cloud based services to allow for desktop functionality with compute capacity in a cloud infrastructure.   They are already doing this, I believe they will put more resources behind this.

3) They will cut expenses sharply.   This unfortunately will mean layoffs.   Not a huge prediction right there.    Look at their revenues compared to Apple which  are roughly $58 billion Vs $160 Billion but their EBITA are $4.4 Billion vs $60 billion.  Dell isn’t in a position to raise prices to where are they gonna increase their EBITA?  Through cost reduction.     Very roughly they could make their $24 Billion investment back in 5 years at their current earnings pace, but they will want to make that money back much faster, hence the cuts.

I predict that they will find a way to continue to serve their markets and they will be successful, if somewhat changed company in 5 years.   That Microsoft money will limit them rather them help them though if they marry their success to Windows success in my opinion.    Check back with me in 5 years to see if my predictions are correct…

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