Dell Said to Near Buyout as Microsoft Talks Deal Financing(bloomberg.com)
bloomberg.com
Dell Said to Near Buyout as Microsoft Talks Deal Financing
http://www.bloomberg.com/news/2013-01-22/dell-said-to-near-buyout-as-microsoft-discusses-deal-financing.html
61 comments
According to the article, Microsoft is not buying Dell. They are financing the deal - and at $2 billion, essentially out of petty cash.
While there are many possible upsides, the one that stands out is that as a private entity, they can participate with Microsoft on research without worrying about Wall Street's demands for quarterly growth. For Microsoft, inside knowledge of the hardware roadmap will help them maintain leadership in the Enterprise segment.
As for Red Hat, they didn't earn $2 billion in net revenue last year. And Linux is certainly not a path to success with consumers or on the enterprise desktop.
While there are many possible upsides, the one that stands out is that as a private entity, they can participate with Microsoft on research without worrying about Wall Street's demands for quarterly growth. For Microsoft, inside knowledge of the hardware roadmap will help them maintain leadership in the Enterprise segment.
As for Red Hat, they didn't earn $2 billion in net revenue last year. And Linux is certainly not a path to success with consumers or on the enterprise desktop.
To be clear, anyone who participates in the financing is given fractional ownership in proportion to their participation. There are a number of reasons to have fractional ownership, but at this level it is generally strategic.
Dell's strategy seems to be about increasing their enterprise presence. And that can be achieved in much the same way IBM or HP go about it which is a combination of software offerings, product mix, and consulting.
At the enterprise software level there is a 'gap' (at least I see one, it may be bogus) of enterprise level support for Linux systems. Red Hat does software support (RHEL) but they don't have a hardware business to go along with it. So if I'm an enterprise customer, and I want to install a Linux server 'farm'/'grid'/'cloud' and I want one team to "own" the support issues, I'm sort of stuck.
I recently did an evaluation of the HP Gen8 server hardware which was amazing hardware, but really suffered from a sort of 20th century server mindset. I've got Supermicro hardware which goes out of its way to be flexible, but I'm still chasing driver updates in enterprise linux builds (RHEL or CentOS). So having something a server choice that was strongly aligned to Linux in the enterprise space, and willing to provide first responder support to driver compatibility issues, that would be a good addition to the current choices.
And if one of your strategic partners was Microsoft, I expect it would be uncomfortable pushing a strategy that made Linux a solid alternative in the Enterprise at that level.
Dell's strategy seems to be about increasing their enterprise presence. And that can be achieved in much the same way IBM or HP go about it which is a combination of software offerings, product mix, and consulting.
At the enterprise software level there is a 'gap' (at least I see one, it may be bogus) of enterprise level support for Linux systems. Red Hat does software support (RHEL) but they don't have a hardware business to go along with it. So if I'm an enterprise customer, and I want to install a Linux server 'farm'/'grid'/'cloud' and I want one team to "own" the support issues, I'm sort of stuck.
I recently did an evaluation of the HP Gen8 server hardware which was amazing hardware, but really suffered from a sort of 20th century server mindset. I've got Supermicro hardware which goes out of its way to be flexible, but I'm still chasing driver updates in enterprise linux builds (RHEL or CentOS). So having something a server choice that was strongly aligned to Linux in the enterprise space, and willing to provide first responder support to driver compatibility issues, that would be a good addition to the current choices.
And if one of your strategic partners was Microsoft, I expect it would be uncomfortable pushing a strategy that made Linux a solid alternative in the Enterprise at that level.
Red hat isn't cut out to be a full stack partner. Not large enough to support the 38,000,000 PC's Dell sells a year. Indeed, few companies are.
Nevermind that partnering with Microsoft made Michael Dell a billionaire and the thirty year relationship between the companies. Or the lack of a roadmap for Linux and a mobile strategy.
Nevermind that partnering with Microsoft made Michael Dell a billionaire and the thirty year relationship between the companies. Or the lack of a roadmap for Linux and a mobile strategy.
I'd be interested in knowing your (brudgers) history with this to put that statement into context. Your blog doesn't offer much insight.
I ask because the statement "Red hat[sic] isn't cut out to be a full stack partner" is unsupported. Followed by the comment on "38M PC's Dell sells" in a year missed the point completely.
The margin in Dell's business is in servers. Not 'desktops' and not 'laptops' (which may be your primary exposure to the company, but I don't know). The successful enterprise server companies (IBM, HP, and to some extent Sun/Oracle) benefit from that 'full stack' support, but one of Red Hat's challenges has been that no single partner (with the possible exception of Supermicro) can extract the necessary cooperation from the third party device makers to get the support they need to drivers. IBM, HP, or Sun can say to Marvell "We're going to use your SATA controller in our xyz-666-3245-665-/A controller, if we can get driver source code and 24hr turn around on support issues." Those agreements will usually put a few exemplar machines inside of Marvell (or what ever vendor) which will work with the company to insure that the driver does everything it should and nothing it shouldn't. And more importantly when it breaks it gives enough information to turn around a fix in short order. Those relations cost resources and really are only affordable to companies that have a solid presence in the enterprise space. (or in places like Google where a lot of servers are being used internally)
Dell using Red Hat for their server OS partner, might feel more comfortable, and have better pricing control, than Dell using Microsoft as a partner. And at server volumes and margin points such a strategy is very doable. You could even play Canonical off the Red Hat guys for a bit of competitive pressure. All of that is cheaper than building a new distro team in house and not one of Dell's core competencies.
The more interesting statement though is the last one, "Nevermind that partnering with Microsoft made Michael Dell a billionaire and the thirty year relationship between the companies. Or the lack of a roadmap for Linux and a mobile strategy."
That is all accurate, but what is the truth? And this is where we have to guess. Was the lack of a Linux and mobile strategy because of the partnering with Microsoft? Or was it just a bad guess? If it was the former, then having Microsoft own a big chunk is a problem, if it was the latter then you're not going to get very quality advice from Microsoft based on Microsoft's track record on Linux and Mobile. Either way, what "was" for Dell may have lead up to their current situation, but seems pretty clear that continuing on with the same plan they have had for the last 10 years isn't going to result in success.
That leaves us on HN taking potshots at these dribs and drabs of information. Sort of like CIA analysts looking for a plot inside innocuous movements of goat herds.
I ask because the statement "Red hat[sic] isn't cut out to be a full stack partner" is unsupported. Followed by the comment on "38M PC's Dell sells" in a year missed the point completely.
The margin in Dell's business is in servers. Not 'desktops' and not 'laptops' (which may be your primary exposure to the company, but I don't know). The successful enterprise server companies (IBM, HP, and to some extent Sun/Oracle) benefit from that 'full stack' support, but one of Red Hat's challenges has been that no single partner (with the possible exception of Supermicro) can extract the necessary cooperation from the third party device makers to get the support they need to drivers. IBM, HP, or Sun can say to Marvell "We're going to use your SATA controller in our xyz-666-3245-665-/A controller, if we can get driver source code and 24hr turn around on support issues." Those agreements will usually put a few exemplar machines inside of Marvell (or what ever vendor) which will work with the company to insure that the driver does everything it should and nothing it shouldn't. And more importantly when it breaks it gives enough information to turn around a fix in short order. Those relations cost resources and really are only affordable to companies that have a solid presence in the enterprise space. (or in places like Google where a lot of servers are being used internally)
Dell using Red Hat for their server OS partner, might feel more comfortable, and have better pricing control, than Dell using Microsoft as a partner. And at server volumes and margin points such a strategy is very doable. You could even play Canonical off the Red Hat guys for a bit of competitive pressure. All of that is cheaper than building a new distro team in house and not one of Dell's core competencies.
The more interesting statement though is the last one, "Nevermind that partnering with Microsoft made Michael Dell a billionaire and the thirty year relationship between the companies. Or the lack of a roadmap for Linux and a mobile strategy."
That is all accurate, but what is the truth? And this is where we have to guess. Was the lack of a Linux and mobile strategy because of the partnering with Microsoft? Or was it just a bad guess? If it was the former, then having Microsoft own a big chunk is a problem, if it was the latter then you're not going to get very quality advice from Microsoft based on Microsoft's track record on Linux and Mobile. Either way, what "was" for Dell may have lead up to their current situation, but seems pretty clear that continuing on with the same plan they have had for the last 10 years isn't going to result in success.
That leaves us on HN taking potshots at these dribs and drabs of information. Sort of like CIA analysts looking for a plot inside innocuous movements of goat herds.
A strong Dell buying or partnering with Red Hat would make sense for Red Hat for the reasons you propose, but doesn't really make as much sense for Dell, and especially not for Dell as it is now.
The commodity Linux server world is going to switch, increasingly, to Supermicro or even lower margin providers.
The kind of enterprise sales which do bring in big margin and big absolute dollars for Dell are still Windows (and to a lesser extent, VMware), and include ok storage and crappy networking/accessories.
I think there's money in USG-scale desktop deployments, but it might just be a cost of getting the server business; it's hard to separate out "we can cover all of your desktops AND servers" into separate profitability for each line, since clearly servers, storage, and services are used to cross-subsidize the desktop/laptops.
The weakness for Dell is mobile (which Red Hat doesn't touch); Windows Phone may be a viable partner there, although personally I would have bought RIMM at the depths of their doom instead.
The other weakness has always been a lack of professional services, but we've seen how badly attempts at that have worked out for HP, too. What might have made sense would have been buying mid-market microsoft solution providers and rolling them into Dell Professional Services.
Partnering more with Microsoft seems like the best move for them to preserve total profitability; it probably isn't the best for Dell's overall position in 15 years, but I think that ship sailed; the biggest server vendors in 5-10 years are going to be building totally commoditized stuff to public specs, I believe.
The commodity Linux server world is going to switch, increasingly, to Supermicro or even lower margin providers.
The kind of enterprise sales which do bring in big margin and big absolute dollars for Dell are still Windows (and to a lesser extent, VMware), and include ok storage and crappy networking/accessories.
I think there's money in USG-scale desktop deployments, but it might just be a cost of getting the server business; it's hard to separate out "we can cover all of your desktops AND servers" into separate profitability for each line, since clearly servers, storage, and services are used to cross-subsidize the desktop/laptops.
The weakness for Dell is mobile (which Red Hat doesn't touch); Windows Phone may be a viable partner there, although personally I would have bought RIMM at the depths of their doom instead.
The other weakness has always been a lack of professional services, but we've seen how badly attempts at that have worked out for HP, too. What might have made sense would have been buying mid-market microsoft solution providers and rolling them into Dell Professional Services.
Partnering more with Microsoft seems like the best move for them to preserve total profitability; it probably isn't the best for Dell's overall position in 15 years, but I think that ship sailed; the biggest server vendors in 5-10 years are going to be building totally commoditized stuff to public specs, I believe.
That makes a lot of sense. Seeing it from the Dell perspective a bit more puts them into something of a sticky wicket. I don't think the Ubuntu phone would count as a mobile strategy just yet.
Looking over some of the presentations from the Open Compute Summit it looks like Dell could play there. It has some attractiveness for a vendor that is operationally efficient. I don't see a lot of Windows support there but that may be that I just don't look for it for my shop.
One wonders if they get a big cash infusion from selling off their Laptop/Deskside business to an LG or a Asustek they might carve the company into a enterprise servers, storage, services (SSS) play. Not sure who would head it up though from their current management ranks. Alternatively an OCP/PrivateCloud play for companies that want a more fungible server architecture. Maybe take some of the wilder work Cutler did on the distributed computing side and productizing around that.
Not a fun place to be for them to be sure, I will be watching closely to see what road they pick and how well they execute on it. From such things one can learn quite a bit.
Looking over some of the presentations from the Open Compute Summit it looks like Dell could play there. It has some attractiveness for a vendor that is operationally efficient. I don't see a lot of Windows support there but that may be that I just don't look for it for my shop.
One wonders if they get a big cash infusion from selling off their Laptop/Deskside business to an LG or a Asustek they might carve the company into a enterprise servers, storage, services (SSS) play. Not sure who would head it up though from their current management ranks. Alternatively an OCP/PrivateCloud play for companies that want a more fungible server architecture. Maybe take some of the wilder work Cutler did on the distributed computing side and productizing around that.
Not a fun place to be for them to be sure, I will be watching closely to see what road they pick and how well they execute on it. From such things one can learn quite a bit.
Open Compute type platforms are going to destroy margins. Margins for high volume servers (i.e. anything where Supermicro can play) already suck so much compared to the old school "Dell just has to be cheaper than Sun or IBM" world.
I really think preserving their (dying) enterprise margins gives them better total profit over the next 10 years, vs. being fast to position themselves for the bleak low-margin future. It's just like the RIAA labels -- made more sense for them to eke out $20 CDs for an extra year or four vs. going early into the MP3 future. Use the cash from $20 CD sales to then sue/force unprofitable licenses on anyone crazy enough to do music services, later.
The only really good thing about Dell is that they're not HP. HP has strong channel sales, especially in the middle east/etc., but has probably the worst corporate governance of any major company, and is generally doomed, too.
I really think preserving their (dying) enterprise margins gives them better total profit over the next 10 years, vs. being fast to position themselves for the bleak low-margin future. It's just like the RIAA labels -- made more sense for them to eke out $20 CDs for an extra year or four vs. going early into the MP3 future. Use the cash from $20 CD sales to then sue/force unprofitable licenses on anyone crazy enough to do music services, later.
The only really good thing about Dell is that they're not HP. HP has strong channel sales, especially in the middle east/etc., but has probably the worst corporate governance of any major company, and is generally doomed, too.
"I'd be interested in knowing your (brudgers) history"
Many years ago, I bought an Amiga - it allowed me to feel persecuted. Then life went on, I built a 386 to run AutoCad, Commodore went bust and somewhere along the way I stopped feeling persecuted because everyone didn't see how great the Amiga was. But I remember the feeling and how futile the arguments.
Sure Dell makes money on servers. But they sell a lot of servers because they can be a single source and because being a single source adds value for their customers (27% of revenue from government customers) And of course, they don't lose money when Latitudes are on the same P.O. Indeed, some of them are high margin.
RedHat's challenges are not really relevant to the reason Dell may go private. Dell sells Linux because they sell hardware not because they share an anti-Microsoft ideology. Anyway, rather than lock themselves in to a single platform, maybe RedHat should look at TechData for a hardware partner...I think that's a very handsome building on their Wikipedia page, but then again I might be biased.
"Dell using Red Hat for their server OS partner, might feel more comfortable, and have better pricing control, than Dell using Microsoft as a partner."
An assumption that everyone hates Microsoft aside, there isn't much meat to hang the "might" upon. It's nice to have friends who can loan one money - Microsoft's $2 billion is more than RedHat's total revenue last year. Then again, Dell's net revenue last year exceeded Redhat's total asset value.
In other words, Dell plays in the big leagues, not double A where companies like RedHat lack a mobile strategy, have a weak desktop presence, and can't hit the breaking ball.
The biggest blindspot on HN is created by the rage people feel over Microsoft. My gut suggests that it's a bit of a blindspot for YC given PG's essays. On the other hand, I empathize with it. I once bought an Amiga.
Many years ago, I bought an Amiga - it allowed me to feel persecuted. Then life went on, I built a 386 to run AutoCad, Commodore went bust and somewhere along the way I stopped feeling persecuted because everyone didn't see how great the Amiga was. But I remember the feeling and how futile the arguments.
Sure Dell makes money on servers. But they sell a lot of servers because they can be a single source and because being a single source adds value for their customers (27% of revenue from government customers) And of course, they don't lose money when Latitudes are on the same P.O. Indeed, some of them are high margin.
RedHat's challenges are not really relevant to the reason Dell may go private. Dell sells Linux because they sell hardware not because they share an anti-Microsoft ideology. Anyway, rather than lock themselves in to a single platform, maybe RedHat should look at TechData for a hardware partner...I think that's a very handsome building on their Wikipedia page, but then again I might be biased.
"Dell using Red Hat for their server OS partner, might feel more comfortable, and have better pricing control, than Dell using Microsoft as a partner."
An assumption that everyone hates Microsoft aside, there isn't much meat to hang the "might" upon. It's nice to have friends who can loan one money - Microsoft's $2 billion is more than RedHat's total revenue last year. Then again, Dell's net revenue last year exceeded Redhat's total asset value.
In other words, Dell plays in the big leagues, not double A where companies like RedHat lack a mobile strategy, have a weak desktop presence, and can't hit the breaking ball.
The biggest blindspot on HN is created by the rage people feel over Microsoft. My gut suggests that it's a bit of a blindspot for YC given PG's essays. On the other hand, I empathize with it. I once bought an Amiga.
You are projecting a lot into my argument, I find it distracting. I neither hate Microsoft nor idealize open source. Nor do I, and I suppose it's tautological to say so, suffer a "blindspot" created by rage or group think.
I value reasoned arguments that can start from first principles and end up as rebuttal.
In the spirit of reasoned debate, allow me to try to summarize your arguments here:
1) Dell's server revenue is purely a function of their vertical integration (single source).
2) Red Hat isn't relevant because their revenues are small relative to Dell.
I am not persuaded by the argument that Dell's only competitive advantage is that they integrate a number of systems. If that were the only reason than HP, SuperMicro, or even Sun/Oracle should be able to capture market share away from them.
I'm not persuaded by #2 because I don't believe revenue is anyway at all to measure Red Hat's impact. I see their impact in the number of seats out in the wild and that is formidable. They are a supported OS on nearly every platform and Oracle has gone so far as to create a clone of their distro to "compete" with them. Oracle has more revenue than Red Hat.
And for the record, I too owned an Amiga, but I didn't feel particularly persecuted.
I value reasoned arguments that can start from first principles and end up as rebuttal.
In the spirit of reasoned debate, allow me to try to summarize your arguments here:
1) Dell's server revenue is purely a function of their vertical integration (single source).
2) Red Hat isn't relevant because their revenues are small relative to Dell.
I am not persuaded by the argument that Dell's only competitive advantage is that they integrate a number of systems. If that were the only reason than HP, SuperMicro, or even Sun/Oracle should be able to capture market share away from them.
I'm not persuaded by #2 because I don't believe revenue is anyway at all to measure Red Hat's impact. I see their impact in the number of seats out in the wild and that is formidable. They are a supported OS on nearly every platform and Oracle has gone so far as to create a clone of their distro to "compete" with them. Oracle has more revenue than Red Hat.
And for the record, I too owned an Amiga, but I didn't feel particularly persecuted.
>"You are projecting a lot into my argument, I find it distracting. I neither hate Microsoft nor idealize open source. Nor do I, and I suppose it's tautological to say so, suffer a "blindspot" created by rage or group think."
Fair. I will imagine that your premise that Microsoft and Dell are circling the drain can be well supported or - should my imagination be too limited - that there is some positive or neutral connotation for "circling the drain" of which I am unaware and that such a connotation is so widespread that any sophisticated reader would immediately pick up upon that connotation when reading your lead, and that it is I who have the blindspot. And if "summary" has been used as shorthand for creating a strawman, then likewise I have a blindspot regarding linguistic convention.
On the other hand, if I am not blind to some HN meme, "1) Dell's server revenue is purely a function of their vertical integration (single source)," is a mis-characterization of my reasoning as formal syllogism.
Single source helps Dell sell servers. It helps them sell desktops, laptops, switches, services, repair parts, et cetera. In 2012, 57% of Dell's revenue came from enterprise and government. Single source benefits Dell's customers by simplifying contract management. It simplifies logistics for their customers as well. None of this should be revelatory when it comes to bureaucracies. However the belief that this is a Pure Functions of Vertical Integration doesn't map well onto the messiness of empirical reality.
That's why I don't hold it. Dell sells server hardware for all sorts of other reasons. Sever farms exist. Ad hoc purchases happen. Heck, slap in a different video card and the box is a workstation - sixty pounds under my desk says this is so.
"2) Red Hat isn't relevant because their revenues are small relative to Dell."
Redhat is relevant. Dell will install it on server hardware at time of purchase. It's one of two Linux offerings. Yet, this doesn't qualify RedHat as a suitable long-term strategic partner. It doesn't disqualify them either. What would seem likely to disqualify RedHat as a long term strategic partner is:
A) limited market share B) limited product line C) limited resources they can bring to bear as a result of those limitations.
For better or worse, "Limited" describes RedHat's relevance as a strategic partner, as well. Dell is roughly an order of magnitude larger than RedHat both in revenue and profits. It is hard to see how a peer to peer partnership of the type you promote would work as a practical matter or create rocket fuel to drive Dell's growth. As a vendor, junior partner, or perhaps even acquisition target the relationship makes sense. But only more debt on top of that to go private is likely allow RedHat to grow to the size of Dell.
If Dell was really interested in pursuing a GNU/Linux first strategy, developing their own enterprise Linux might be a more sensible option. They would control vendor lock-in rather than giving Redhat control of the pudding. And Dell already has a support infrastructure in place and an intimate knowledge of hardware.
On the other hand, Microsoft has approximately the same total revenue as Dell. There's a long term business relationship which has persisted through three decades worth of market changes. Furthermore, Microsoft is able to provide services across the spectrum of computing hardware Dell is likely to produce in the short and medium term, and over the long term the track record indicates Microsoft is likely to provide similar support as the market evolves.
On the other hand, Oracle might be the ideal strategic partner for Dell if they were to go on a Microsoft free diet as they control the licensing of many important FOSS technologies. Certainly, they are about the same size as Dell and more plausible as a market maker.
I suppose one could argue that RedHat's potential impact as a market maker is comparable to Microsoft or Oracle's, though it seems not an argument consistent with peripheral vision or the use of rearview mirrors. It would be hard to argue that any relevance they have is not under greater threat from competition than Microsoft. It doesn't take as much to step in RedHat's pudding as is required to compete with Microsoft - i.e. Canonical, Oracle, Suse, and potentially Dell themselves can provide identical products. Linux is commoditized.
Fair. I will imagine that your premise that Microsoft and Dell are circling the drain can be well supported or - should my imagination be too limited - that there is some positive or neutral connotation for "circling the drain" of which I am unaware and that such a connotation is so widespread that any sophisticated reader would immediately pick up upon that connotation when reading your lead, and that it is I who have the blindspot. And if "summary" has been used as shorthand for creating a strawman, then likewise I have a blindspot regarding linguistic convention.
On the other hand, if I am not blind to some HN meme, "1) Dell's server revenue is purely a function of their vertical integration (single source)," is a mis-characterization of my reasoning as formal syllogism.
Single source helps Dell sell servers. It helps them sell desktops, laptops, switches, services, repair parts, et cetera. In 2012, 57% of Dell's revenue came from enterprise and government. Single source benefits Dell's customers by simplifying contract management. It simplifies logistics for their customers as well. None of this should be revelatory when it comes to bureaucracies. However the belief that this is a Pure Functions of Vertical Integration doesn't map well onto the messiness of empirical reality.
That's why I don't hold it. Dell sells server hardware for all sorts of other reasons. Sever farms exist. Ad hoc purchases happen. Heck, slap in a different video card and the box is a workstation - sixty pounds under my desk says this is so.
"2) Red Hat isn't relevant because their revenues are small relative to Dell."
Redhat is relevant. Dell will install it on server hardware at time of purchase. It's one of two Linux offerings. Yet, this doesn't qualify RedHat as a suitable long-term strategic partner. It doesn't disqualify them either. What would seem likely to disqualify RedHat as a long term strategic partner is:
A) limited market share B) limited product line C) limited resources they can bring to bear as a result of those limitations.
For better or worse, "Limited" describes RedHat's relevance as a strategic partner, as well. Dell is roughly an order of magnitude larger than RedHat both in revenue and profits. It is hard to see how a peer to peer partnership of the type you promote would work as a practical matter or create rocket fuel to drive Dell's growth. As a vendor, junior partner, or perhaps even acquisition target the relationship makes sense. But only more debt on top of that to go private is likely allow RedHat to grow to the size of Dell.
If Dell was really interested in pursuing a GNU/Linux first strategy, developing their own enterprise Linux might be a more sensible option. They would control vendor lock-in rather than giving Redhat control of the pudding. And Dell already has a support infrastructure in place and an intimate knowledge of hardware.
On the other hand, Microsoft has approximately the same total revenue as Dell. There's a long term business relationship which has persisted through three decades worth of market changes. Furthermore, Microsoft is able to provide services across the spectrum of computing hardware Dell is likely to produce in the short and medium term, and over the long term the track record indicates Microsoft is likely to provide similar support as the market evolves.
On the other hand, Oracle might be the ideal strategic partner for Dell if they were to go on a Microsoft free diet as they control the licensing of many important FOSS technologies. Certainly, they are about the same size as Dell and more plausible as a market maker.
I suppose one could argue that RedHat's potential impact as a market maker is comparable to Microsoft or Oracle's, though it seems not an argument consistent with peripheral vision or the use of rearview mirrors. It would be hard to argue that any relevance they have is not under greater threat from competition than Microsoft. It doesn't take as much to step in RedHat's pudding as is required to compete with Microsoft - i.e. Canonical, Oracle, Suse, and potentially Dell themselves can provide identical products. Linux is commoditized.
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Now that you said it, it makes a lot of sense for Microsoft to invest a couple billions on preventing that from happening.
I had the same thought. Specifically, the thought that immediately struck me was the HP acquisition of Compaq/DEC, which Scott McNealy famously called "two garbage trucks colliding." Dell is in a hot world of hurt, with Supermicro on one side and tablets on the other -- and I don't see how they compete with either of them, let alone both...
> partner with Redhat and move their product line to something more standard with solid Linux support
Your suggesting they should turn their back on the majority of their current user base.
Doesn't sound like such a smart business move to me.
Your suggesting they should turn their back on the majority of their current user base.
Doesn't sound like such a smart business move to me.
You can still run all your Windows workloads in a virtualized environment under either Openstack or RHEV.
Which again is not something that the radical majority of their customers is ever going to do.
Correct me if I'm wrong but doesn't running Windows virtually still require a valid Windows license?
So I'm not exactly sure what this would achieve in the way of cost savings.
In fact by adding in another OS layer the business tech support costs may in fact rise.
So I'm not exactly sure what this would achieve in the way of cost savings.
In fact by adding in another OS layer the business tech support costs may in fact rise.
Licenses are only part of your cost. By running your workloads inside virtual machines you end up with more simpler machines that cost less to operate (because, being simpler, they break less often). You also get better hardware utilization.
Dell's strategy is to grow its non-PC business: services and software. It's already executing it.
Unless that "teaming with Red Hat" meant going full enterprise/server and dropping consumer lines, I just don't see that going well (though I'm not sure I would say that enterprise equipment is really lacking in the Linux support area right now anyway...).
I expect it is a positive for Dell to go private again, but I don't know if its in Microsoft's interest to be part of the game.
Even according to your prediction, at worst they get their money back and then some. My guess is that MS wants the next Dell to still be a MS ally. Microsoft isn't going away anytime soon and Dell needs to keep that in mind if they want to be worth more than what it is today.
Even according to your prediction, at worst they get their money back and then some. My guess is that MS wants the next Dell to still be a MS ally. Microsoft isn't going away anytime soon and Dell needs to keep that in mind if they want to be worth more than what it is today.
What replaced Dell? HP?
Offices are still buying desktop PCs by the pallet-load. What are they buying?
edit: I'll answer my own question: http://en.wikipedia.org/wiki/Market_share_of_leading_PC_vend...
Offices are still buying desktop PCs by the pallet-load. What are they buying?
edit: I'll answer my own question: http://en.wikipedia.org/wiki/Market_share_of_leading_PC_vend...
We went with Acer desktops, Apple portables, and HP or SuperMicro servers. Dell decided to classify us as government when we are an educational institution. It was a very, very sore point[1], and the government pricing was 2x the educational price.
1) only time I have ever lost my cool with a vendor
1) only time I have ever lost my cool with a vendor
Hmmm .. a company that refuses to sell to a potential customer. And that doubles their prices for the government. I guess one cant be too surprised at their downfall....
Lenovo around here.
EDIT: And in some places, virtual machines. Good for MS and those places, not so good for Dell.
EDIT: And in some places, virtual machines. Good for MS and those places, not so good for Dell.
> EDIT: And in some places, virtual machines
All VMs run on hardware.
All VMs run on hardware.
But it may be increasingly assembled by the providers of virtual services from components, rather than purchased from Dell.
But it's not generally 1-1.
Oh yes, local VMs and VMs on servers and in the cloud are great; but you also need one device in front of each office worker that connects to them.
They are also just NOT buying. A five year old computer should run email and Office just fine. Maybe get a RAM upgrade or something for $50.
I think its also about Microsoft and how the company has failed to provide any real additional value over a Windows XP machine with Office 2001. My corporate client is running XP with Office 2003 and I really wish they'd stuck with the 2001 edition. Same features, less annoying.
Stagnation in innovation is coming back to bite them.
Stagnation in innovation is coming back to bite them.
For many of them XP is perfect, a lot of their work is being done online or custom apps.
There are lots of new companies/employees, businesses are buying lots of computers regardless of how long they are using them for.
Those offices are buying super low margin PCs that make Dell very little money.
The PC market is fairly cutthroat, a result of, all things, Microsofts general business philosophy of commodifying its complements.
The PC market is fairly cutthroat, a result of, all things, Microsofts general business philosophy of commodifying its complements.
Based on the earlier rumors of Dell moving into thin clients / hosted PC service, and now Microsoft's stamp of approval assisting in this deal, it seems like there won't be much of a mainstream PC enterprise market in a few years. Just lots of thin clients on desks and lots of big servers somewhere.
lenovo and thin clients
Dell is not being purchased by Microsoft. Silver Lake Partners, a PE firm that does investments and leveraged buyouts (LBOs), is conducting an LBO of Dell. Microsoft is merely providing some of the capital for the buyout, which would likely take the form of a loan to Silver Lake Partners.
Again, Microsoft is not buying Dell, Silver Lake Partners is.
It makes a lot of sense for MS 1. from a strategic standpoint, 2. Microsoft having tens of billions of cash reserves which need a return, and 3. MS + Silver lake have a prior relationship: MS purchased Skype from them.
Again, Microsoft is not buying Dell, Silver Lake Partners is.
It makes a lot of sense for MS 1. from a strategic standpoint, 2. Microsoft having tens of billions of cash reserves which need a return, and 3. MS + Silver lake have a prior relationship: MS purchased Skype from them.
Dell on Apple in '97:
> "I’d shut it down and give the money back to the shareholders"
Dell on Dell today:
See above.
Sound like he heeds his own advice
Have to respect that :)
> "I’d shut it down and give the money back to the shareholders"
Dell on Dell today:
See above.
Sound like he heeds his own advice
Have to respect that :)
They're not shutting Dell down...
But if they're going to be backed by private equity ... those guys REALLY want their 20+% return in five years. And they'll direct Dell to shutter unprofitable or non-key parts of their business as soon as possible.
I expect Dell to be a much smaller company a year from now.
I expect Dell to be a much smaller company a year from now.
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Dell desktops and laptops are incredibly popular in India because they are officially Linux supported (N series) and because of their CompleteCover warranty, which is awesome.
Macbooks are very expensive out here, plus Apple warranty is really, really bad.
Surprisingly, the other company which has a decent after sales support is Samsung (Lenovo sells through resellers, which screws up the experience).
Macbooks are very expensive out here, plus Apple warranty is really, really bad.
Surprisingly, the other company which has a decent after sales support is Samsung (Lenovo sells through resellers, which screws up the experience).
Dell is a surprising addition, but only logical if you consider that every business partner of Microsoft, ever, was either bought out or killed by Microsoft. I am still surprised people want to be business partners with that company. Watch what will happen to Nokia.
I don't see what advantages Dell hopes to gain by going private. Dell has always been a one-trick pony: reduce the cost of PCs and servers by eliminating retail operations and manufacturing to-order or overseas. Everyone caught up to Dell a decade ago. Their problem today is that they provide nothing distinctive and occupy a stagnant market niche. Are they planning some sort of outrageously-expensive pivot to Apple-style consumer electronics or a Nokia-style desperation move to pin all their hopes on Microsoft's mobile platforms?
I hope they don't cancel the ubuntu xps developers edition :(
Dell, Nokia, Borders, Blockbuster. The world changes and people shift platforms. It doesn't matter how good the company is when they don't have products anyone wants. The enterprise market is still there but not so much with Dell and it is never going to have the same margins again. Microsoft is just going to draw this out.
I could see a certain benefit to a Microsoft-owned Dell.
It might sound strange to the HN crowd, but I've actually seen more loyalty toward Dell than MS in "the enterprise" recently.
I could see a strategy around retaining and expanding certain parts of the the enterprise business being enabled by owning and integrating the entire stack.
It might sound strange to the HN crowd, but I've actually seen more loyalty toward Dell than MS in "the enterprise" recently.
I could see a strategy around retaining and expanding certain parts of the the enterprise business being enabled by owning and integrating the entire stack.
i don't get what MS is trying to achieve. the market isn't there anymore. so why prop up a business with outside money?
dell for consumers is done. low margin commodities can be done without that kind of overhead. a race to the bottom is profitable for while, but then you reach it and boom.
dell for consumers is done. low margin commodities can be done without that kind of overhead. a race to the bottom is profitable for while, but then you reach it and boom.
"dell for consumers is done."
And going private is the best way for Dell to pivot out of that segment without shareholder lawsuits. Or to pivot within it.
And going private is the best way for Dell to pivot out of that segment without shareholder lawsuits. Or to pivot within it.
Dell makes a nice bit of coin (2+bil in profit last quarter according to google), mostly from the enterprise stuff, hence the kerfuffle over 3Par 2 years ago.
What I don't get is why they're submitting to a leveraged buyout.
What I don't get is why they're submitting to a leveraged buyout.
It's Michael Dell that's trying to bring the company private. It's hardly submitting to a leveraged buyout when it's the founder and CEO (who still owns ~ 12% of the company) leading the effort.
Wither Alienware?
I haven't bought a Dell PC since 2000. It was a piece of junk. Their support was also junk. I'm curious if this has changed in the past decade. Anyone bought a Dell recently that wants to weigh in?
EDIT: Guess not (which isn't too surprising)
EDIT: Guess not (which isn't too surprising)
It's hardly scientific, but both my parents have Dell laptops, and they seem happy enough with them. I'm not a big fan of the plastic construction, having been spoiled by my metal Macbook, but they seem solid enough, and apparently there's always some special offer of one kind or another to take advantage of, so the prices can be very reasonable.
And my old employer bought dell desktops. I guess they had some bulk deal or something. They always seemed basically fine, and felt pretty solidly put together - I wouldn't have wanted mine to fall on my foot. Some of the staff had dell laptops, and nobody seemed to have much to say about them one way or the other. Which is probably exactly what you want, really...
I can't speak for older Dell stuff, nor for anybody else's experience, but I've seen no evidence that their computers are worth avoiding.
And my old employer bought dell desktops. I guess they had some bulk deal or something. They always seemed basically fine, and felt pretty solidly put together - I wouldn't have wanted mine to fall on my foot. Some of the staff had dell laptops, and nobody seemed to have much to say about them one way or the other. Which is probably exactly what you want, really...
I can't speak for older Dell stuff, nor for anybody else's experience, but I've seen no evidence that their computers are worth avoiding.
Dell customer service was awesome, then turned awful in 2000 or so when Dell left the company. I dont know how it is now but I imagine better again? Dells entire value was solid computers + great service, thats how they got big. These days I suppose everybody makes pretty good quality hardware. Having said that my last PC purchase was in 2005. All Mac since then.
The newer products are actually pretty good: XPS 12, XPS 27, they announced the XPS 13 with a 1080p screen, and so on...
However, I think they had some problems before that and this might be one of the reasons why they're in a pretty bad shape right now (the other big reason being the iPad, tablets in general, Android, etc. of course).
However, I think they had some problems before that and this might be one of the reasons why they're in a pretty bad shape right now (the other big reason being the iPad, tablets in general, Android, etc. of course).
I'm sure Dell would have preferred Microsoft give them an OS that people would want to buy PC to use. But this will do.
Cool. Secure Boot for all your dell stuff.
Microsoft will now have their hands in
1) Facebook
2) Nokia
3) Dell
Interesting
Interesting
And all that without making anything anyone gives a shit about :-)
I see that there are several reports of this rumor floating around, I suspect that its true and the 'leaker' is someone who is trying to get a better deal by letting the world know you can buy Dell for $14/share. I expect it is a positive for Dell to go private again, but I don't know if its in Microsoft's interest to be part of the game. I expect a successful Dell strategy might be to partner with Redhat and move their product line to something more standard with solid Linux support. Which is to say something closer to Supermicro's strategy but with Redhat on board.