Founder Michael Dell has done as much as he can with Dell Inc. (NASDAQ/DELL). In just over 25 years, he managed to grow the company he started out of his garage into the world’s third-largest maker of personal computers (PCs); but with the explosion of mobile devices, Dell needed a “Plan B,” according to my stock analysis.
The proposed $24.4-billion deal to take the company private will be the first step in the transformation of the company into a “mini IBM,” according to Wall Street pundits. Dell wants to focus on developing its business that caters to large companies and may include the possible divestiture of its struggling PC business. (Source: Gupta, P. and Damouni, M., “Dell to go private in landmark $24.4 billion deal,” Reuters, February 5, 2013.) Just go back nearly 10 years, and you’ll see that International Business Machines Corporation (NYSE/IBM) did the same after selling off its PC business to Lenovo in 2004 to focus on services to large companies.
The strategy shift for Dell is not a surprise, given the declining PC business, based on my stock analysis. Dell tried to produce tablets, hybrid laptops/tablets, and other mobile devices to compete in light of the declining PC market. But at the end of the day, Dell failed to keep up with the likes of Apple Inc (NASDAQ/AAPL) and Samsung Electronics Co., Ltd., according to my stock analysis.
Hewlett-Packard Company (NYSE/HPQ), under CEO Meg Whitman, is also trying to keep its sinking ship afloat. But with crippling declines in the demand for PCs and intense competition in printers and other areas of the sector, it has not been easy for Hewlett-Packard (HP), as my stock analysis suggests. But unlike Dell, in addition to selling its PCs, HP is streamlining its product line in an attempt to produce a leaner and more efficient technology company. HP also has a dedicated group responsible for growing the mobile business; albeit; it may be too late, according to my stock analysis.
As my stock analysis suggests, the PC market is dead, and HP will need to re-invent itself. Dell finally gets it, and now the company must work hard to try to catch up with IBM in the enterprise area.
The problem with old technology companies such as Dell and Hewlett-Packard is that they didn’t keep up with the times. My stock analysis indicates that during the early days of the technology revolution in the mid-80s to early 90s, PCs were the big thing, with the shift from amber screen IBM PCs and “Atari Commodore 64K” computers to more powerful “Windows”-based PCs that began to sprout up everywhere from homes to businesses. Those were the glory days for PC companies in the equities market, according to my stock analysis; but the technological shift is occurring again, and old tech companies selling tired products are dying a slow death, unless they make drastic changes.
Former Wall Street star Microsoft Corporation (NASDAQ/MSFT) is also another old tech company that is trying to revitalize its business via new mobile technologies, entering into the hardware business with its “Surface” tablet.
My stock analysis suggests that as we move forward, I expect there will be more major changes, as the old tech stars HP and Microsoft, along with chipmakers Intel Corporation (NASDAQ/INTC) and Advanced Micro Devices, Inc. (NYSE/AMD), try to re-invent themselves and adapt to the ever-changing technology climate. (Read “Why Chipmakers Need to Focus on the Mobile Market.”)