Dell, which built itself into a tech powerhouse by selling Windows-based PCs, is being seriously hurt by poor Windows 8 adoptions and big slowdowns in enterprise Windows 7 upgrades. So says a Dell SEC filing. And things may only get worse from here -- potentially for Microsoft as well as Dell.
Computerworld's Gregg Keizer uncovered the information in an SEC proxy filing that details Michael Dell's reasons that he believes Dell's shareholders should accept his $24.4 billion buyout offer. Microsoft is kicking in $2 billion to private-equity firm Silver Lake Partners as part of the deal.
The proxy statement says at one point:
"The difficult environment faced by the Company as a result of its underperformance relative to a number of its competitors [includes]…the uncertain adoption of the Windows 8 operating system."
That's not a tremendous shock, given that Windows 8 has not met most people's sales expectations. The unexpected bad news is that Dell is also being hurt by "unexpected slowdowns in enterprise Windows 7 upgrades," according to the filing. That spells serious trouble for Dell. Keizer notes that "Slowing sales of Windows 7 machines at Dell may indicate that corporations have largely completed their migrations from Windows XP."
If that's the case, Dell could be in for very hard times. It has become dependent on enterprise sales, and if enterprises aren't upgrading in large numbers to Windows 7, and are staying away from Windows 8, it's not clear where big chunks of revenue will come from. It doesn't sell smartphone and sells few tablets, and has so far has been locked out of big-growth markets.
It's also an indication that Microsoft's gamble on Windows 8's radical design hasn't paid off. The company designed Windows 8 more for touchscreen tablets than PCs, and enterprises have been leery of upgrading to it. If enterprises have largely completed migrations from Windows XP to Windows 7, it could mean slowdowns in sales to big businesses.
Given that consumers are shifting their spending from traditional computers to tablets, Microsoft is being hurt because its Windows 8 tablets haven't taken off, either.
Dell's filing hints that Windows 8 might have brought Microsoft the worst of both worlds -- potentially slower enterprise sales without making a dent in the mobile market. It's not quite true that as Dell goes, so goes Microsoft, but there's no good news at all for Microsoft in Dell's proxy statement.