Dell's name rings from the desktop to the data center. The world's #3 supplier of PCs (behind #1 Lenovo and #2 Hewlett-Packard) Dell provides a broad range of technology products for the consumer, education, enterprise, and government sectors. In addition to its line of desktop and notebook PCs, Dell offers network servers, data storage systems, printers, Ethernet switches, and peripherals, such as displays and projectors. It also markets third-party software and hardware. The company's services unit provides asset recovery, financing, infrastructure consulting, support, systems integration, and training, as well as hosted IT services. Dell was taken private in 2013 in a deal valued at nearly $25 billion. Two years later, Dell agreed to acquire EMC, which makes computer storage systems, for $67 billion, the biggest pure technology deal.
Change in Company Type
Dell became a private company in October 2013 through a buyout of shareholders by company founder and CEO Michael Dell and private equity firm Silver Lake Partners. Away from the scrutiny of Wall Street, analysts say Dell might stand a better chance of turning itself around -- something the company has had trouble doing amid heightened competition from the likes of HP, Lenovo, Apple, Google, Acer, and IBM.
Dell's Client Solutions unit accounts more than two thirds of the company's revenue, which largely relies on PC sales. Client Solutions includes desktops, thin client products, notebooks, tablets, and services. While generating revenue, the unit also absorbs significant overhead for the company. has traditionally been a desktop PC company, and desktop PCs have generated a quarter of the company's total revenue. While there has been shrinking demand for PCs, Dell has posted eight straight quarters of growth in that business.
Dell's other units are the Enterprise Solutions Group (25% of revenue), which include servers, networking, storage, and related services; Dell Services (5%), which includes IT and business services, including infrastructure, cloud, applications, and business process services, and Dell Software Group (3%), which sells management and security software, and information management software.
Third parties manufacture the majority of the client products Dell sells under the Dell brand. Dell uses contract manufacturers and manufacturing outsourcing relationships as part of its strategy to enhance Dell’s variable cost structure and to achieve Dell’s goals of generating cost efficiencies, delivering products faster, better serving Dell’s customers, and building a world-class supply chain.
The company is moving to bolster and expand its capabilities for cloud computing and big data and information management.
Dell has generated about half of its revenue outside of the US. Because it does a significant portion of its business in international markets, the company is looking to bolster its presence in developing markets, such as the BRIC (Brazil, Russia, India, and China) countries. Revenue from emerging countries increased 9% in 2015 (ended January), driven by revenue from India and China. It also continues to look overseas to cut operational costs. Based in Singapore, Dell's Asia/Pacific segment includes manufacturing and distribution units in China, India, and Malaysia, as well as a business center in India.
As privately held company, Dell is not required to make information about its finances public. But, as part of the process of buying EMC, Dell reported financial statements to the SEC in late 2015 in the form of a proxy statement for EMC shareholders who will vote on the deal in 2016.
The company revealed that its revenue is up, but profit turned to loss in the two years since it went private.
For 2015 (ended January), Dell reported revenue of $58.1 billion compared to $55.8 billion in 2014 and $56.9 billion in 2013. The company posted a loss of $1.2 billion in 2015 compared to a loss of $3.3 billion in 2014, and a profit of $2.37 billion in 2013.
Dell reported sales growth in its four units in 2015 from 2014. The increases came from good market conditions coupled and what it termed better execution through strategic pricing and the leveraging of its direct sales force and channel partners. Revenue from its client solutions segment, the biggest unit, rose 4% to $39.6 billion in 2015 from $37.9 billion in 2014.
Going private was not a cheap process. Items including amortization of intangible assets, purchase accounting adjustments, the costs related to the going-private transaction, and other corporate expenses. In aggregate these costs totaled $3.6 billion and $5.3 billion for 2015 and 2014, respectively. Absent those , 2015 net income would have been $1.7 billion.
Dell is working, away from the glare of stock analysts and investors, to become an end-to-end hardware, software, and services provider. As part of the transformation, the company continues to shift its portfolio of products and services to provide higher-value and recurring revenue streams over time.
Dell has been investing in research and development activities that support its strategic initiatives. It has 18 research and development centers around the world, including one in Silicon Valley. The company's R&D expenses were have averaged $1.2 billion over the past three years.
In early 2014 it extended a reseller and implementation partnership with California-based NetSuite, which offers cloud-based business process management software to midsized companies and divisions of larger enterprises. The deal falls in line with Dell's focus on enterprise business. Also that year Dell partnered with Red Hat on network function virtualization technology.
In late 2015, he company the spin off of its Secureworks subsidiary in motion. Secureworks is expected to make an initial public stock offering in 2016. Dell's proceeds would help it pay for the EMC acquisition.
With the EMC acquisition, Dell will emerge from the cloak of privacy and become a public company.
Mergers and Acquisitions
The acquisition of EMC for $67 billion, announced in October 2015, makes Dell more of a full-service IT company, selling everything from PCs and services to storage systems for cloud-based operations. Dell expects that customers will be attracted to its one-stop shop as competitors such as Hewlett-Packard have split in two. The EMC deal is expected to close in mid-2016.
Since the beginning of fiscal 2012, Dell has acquired more than a dozen businesses. These acquisitions have extended Dell's core capabilities in a variety of enterprise offerings, including storage, networking, virtualized server, data center, desktop solutions, and software-as-a-service application integration, as well as enabled expansion of its customer financing activities.
Dell completed nine such acquisitions in fiscal 2013, including its acquisitions of SonicWALL, Wyse Technology, and the $2.4 billion purchase of Quest Software, a provider of IT management products for handling areas such as systems, security, and workspace.
In 2014 Dell added to its data mining and predictive analytics portfolio with the purchase of StatSoft, a provider of advanced analytics software.