HP’s Hardware Exit Could Give Dell A Boost

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Peter Levine, a general partner at venture capital firm Andreessen Horowitz, has known and worked with Michael Dell in various relationships over “many, many years.” Prior to moving into venture capital, Levine ran the data centre and cloud group at Citrix, which he joined in 2007 after serving as CEO at XenSource. Previously, he was an executive at storage and security provider Veritas, which was bought by Symantec for $10 billion in 2005.

Levine said that more hardware companies are turning their focus on software infrastructure — similar to what Dell is now doing.

“I’ve seen them go through the evolution from being a PC/server vendor to being a full-service organisation,” Levine said. “The move to cloud computing — and the emphasis on software and building out a software/hardware solution stack around cloud computing — is an interesting and innovative approach for the company. They’re taking their hardware and service assets, coupling that with software assets, and moving toward the cloud computing infrastructure space.

“Michael Dell is a visionary leader who’s succeeded in the last couple of years to increase the value of the company from a customer perspective,” Levine said. “That’s ultimately how these things get measured. Their acquisitions in the service space have made them more comprehensive.”

Nevertheless, Levine doesn’t believe the company is completely out of the woods yet.

“There is a subtle difference between what I and other people might think of Michael Dell versus Dell as a company,” Levine said. “Dell as a company, to me, still feels like a hardware company. I know they’re rapidly changing that to increase their service offerings. Ultimately, I think it’s going to come down to software, which is going to make a huge difference in their overall ability to deliver all these new capabilities.

“I think they’re on a great path to get there. I think Michael’s a visionary leader for the company — that’s why he came back — and we can see a lot of things in process. Their next move, providing cloud infrastructure and hosting applications as a service, is a smart one.”

Seeing a Changing Market

Pund-IT analyst King believes Michael Dell has learned some valuable lessons from other companies about what to do — and what not to do — in order to grow Dell’s core business and expand into new areas.

“HP is a great example of this,” King said. “It did $41 billion in the PC business last year at a 5 percent margin. Basically, a third of their business produced about 15 percent of their profits.

“What [Michael] Dell did was look around to see what other CEOs have done — especially [Samuel] Palmisano at IBM, who has moved quickly and aggressively to a software-and service-driven business, using software as a differentiator for their hardware.

“Dell will continue in the PC business and will find plenty of buyers. [Michael] Dell’s kept his eye on the prize: the cloud and all the software and services that go with it.

“They’re selling into nine of the top 10 web services providers in the world, and they were the first vendor to create a hyper-scale cloud computing unit to focus specifically on those data centres. Dell may be underestimated by some people. That would be a mistake.”