HP’s Hardware Exit Could Give Dell A Boost

Pre-med student Michael Dell started his computer-upgrading company at age 19 in his University of Texas dorm room in 1984. Twenty-seven years later, although he’s traded that little place in Austin for a tad-larger headquarters 20 miles up Highway 35 in Round Rock, his company has moved about a zillion miles from where it began.

With his design-it-yourself PCs in the 1980s and 1990s, Dell liberated personal computing in its own image, providing a cost-effective alternative to IBM PCs and Apple Macintoshes. In the mid-1990s, Dell moved into the enterprise: It developed its own PowerEdge servers, resold and serviced storage hardware from EMC, and made it all economically attractive for the company’s core group of customers — specifically, midrange and small businesses — to purchase and deploy the type of IT infrastructure they needed.

In 1992, at age 27, Dell (pictured) became the youngest CEO to have his company ranked in the Fortune 500. In 1996, Dell started selling computers through the Internet, the same year his company launched its first servers. Since then, the business has zoomed to a 2011 market cap of $26.6 billion (£17bn).

Along the way, Michael Dell has earned the respect of many people in both the IT world and the larger global business community. Enterprise Strategy Group founder and chief analyst Steve Duplessie summed up what a lot of people in the business think and say about Dell: “Michael is a true one in a billion — one in $25 billion, to be more accurate.

“I can summarise the man easily. When we were talking about a bidding war that turned into billions [in 2010, Hewlett-Packard outbid Dell to buy 3PAR for $2.4 billion, a deal that many industry observers said was overpriced], Michael said: ‘I still spend my shareholders’ money as if it’s mine — as if it’s real money.’  And you know why? Because it is.

“To other mucky-mucks spending billions, it’s just numbers on a spreadsheet. Michael knows it’s real money. It was pretty profound. The guy is real.”

The shift to software and the cloud

Now the company Dell built is briskly moving into new areas that don’t involve selling and maintaining hardware — something that would have been a completely foreign concept five years ago. It is winding down its storage reseller relationship with EMC and developing new-generation IPs with storage acquisitions: EqualLogic (bought in 2007) and Compellent (in 2010).

Dell also is averaging about two new software company acquisitions per quarter. Recent examples include application optimizer KACE, data management specialist Ocarina Networks, security provider SecureWorks and cloud infrastructure integrator Boomi.

“The computer industry started out as a hardware business, but customers now are showing more interest in solutions [preconfigured combinations of software, hardware and services] than they are in products,” Michael Dell told eWEEK in an interview at his office in Round Rock. “So that’s obviously where we’re headed.

“Look at the example of a large hospital. What they really don’t need is IT. What they want are better outcomes for their patients. That means they need all sorts of tools, like evidence-based medicine, health information systems, better accuracy of prescriptions, claims adjudication systems and affiliated physician systems.

“That’s what we do now. We want to provide all these tools in what people refer to as the cloud.”

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