Who wants to be in the PC business? Not Dell

Turbulent PC industry clearly is not so easy to navigate these days

1 2 Page 2
Page 2 of 2

Dan Olds, an analyst with The Gabriel Consulting Group, said, "Dell is in the process of remaking themselves. Sure, they'll still sell PCs, but they'll sell a lot of other things too."

Olds added that it's a smart move to differentiate your business when part of that business is the turbulent PC industry.

"The PC industry is marked by brutal price competition, a tough distribution model, and a constant need to stay on top of the latest trend," Olds said. "Plus, the PC segment has become even more difficult to negotiate due to other devices, like tablets and smartphones, constantly encroaching onto PC territory."

And while Olds said he doesn't see Dell, or any of the other big PC players, leaving the market anytime soon, the companies that can diversify their business are doing so.

Cases in point: Lenovo, with its smartphones; and Dell, with more enterprise products and services.

Charles King, an analyst with Pund-IT, said Dell's CEO simply doesn't want the company to be wholly or largely dependent on PC sales.

"From the standpoint of profit margins, the worst performing part of IT has been PCs and it's getting even worse," King said. "The situation doesn't automatically make PCs a bad business to be in, but it does mean that in order to deliver healthy profits and growth, traditional PC vendors need to lessen their exposure in low-performing markets and balance their portfolios with higher-margin products and services or risk getting hammered by shareholders."

That was the thinking that nearly pushed HP to slice off its own PC unit last year. However, HP is the world's biggest PC maker and it just didn't make sense for the company to step away from PCs at this point, King said.

While HP decided to stick it out, Dell is still trying to forge a new path for itself.

"Dell is at the crossroads where IBM was in 2004," said Sarah Rotman Epps, an analyst with Forrester Research. "IBM shed its PC business and has thrived ... Every day Dell loses share to Lenovo, Samsung, and other competitors. It can't compete on price and it can't compete on style, so what is Dell's differentiator? Dell may see itself as a services company, but that's still aspirational given its heavy investment in PCs."

Jim McGregor, principal analyst with TIRIAS Research, said Dell needs to make these changes to its business if it wants to succeed.

"Dell faces stiff competition, not only in PCs, but also in servers," McGregor said. "The good thing about focusing on enterprise customers is that they need more than just PCs and servers. They need software, services and solutions."

"But Dell faces growing competition in these segments as the dynamics of the market change ... Offering services and complete solutions is the difference between surviving and thriving," he said.

Sharon Gaudin covers the Internet and Web 2.0, emerging technologies, and desktop and laptop chips for Computerworld. Follow Sharon on Twitter at  @sgaudin, on Google+ or subscribe to Sharon's RSS feed . Her email address is sgaudin@computerworld.com.

See more by Sharon Gaudin on Computerworld.com.

Copyright © 2012 IDG Communications, Inc.

1 2 Page 2
Page 2 of 2
7 inconvenient truths about the hybrid work trend
Shop Tech Products at Amazon