Dell CEO Stands by Windows 7 Big Bang Theory

Dell chief Michael Dell is projecting a Windows 7 upgrade cycle that could put PC growth “well into the teens.” What’s unclear is whether Dell will be able to grab a bigger share of the revenue pie or be outmaneuvered by rivals like HP (HPQ) and Acer.

Following the company’s disappointing quarter, Dell executives said the timing of the Windows 7 launch hurt revenue and earnings. That’s why Dell’s third quarter results fell short of expectations.

On a conference call, Dell executives sounded upbeat about the fourth quarter and the fiscal year to come.

When asked about the potential for a PC replacement cycle that would be above the 10 percent growth rate usually expected, Michael Dell said:

I would not be surprised to see it well into the teens. I think there is an aging installed base for sure. You just have an accumulation of new technologies at the hardware, software, virtualized client and these IT managers really know they cannot extend the life of these client assets forever. While I don’t think it is all going to occur at once, I think it will be a rolling refresh that occurs over perhaps 18 months, I can’t remember a time when a very high percentage of them skipped an entire operating system. So what we remind them, and they know this, Windows XP is eight years old. So yes I think it is going to be a pretty possible cycle.

Next question was about the corporate upgrade cycle and Dell’s market share. Will Dell go for the earnings or the market share?

We think we are holding or gaining share in the right kind of price points. Our efforts on the cost side should expand our ability to profitably compete in a larger portion of the price points. What I would also tell you is that the pipeline of client opportunities we are already seeing more client activity in the last 30-60 days than we have in a long time and the pipeline for client activity kind of going forward into next year is the strongest it has been in a long time as well. So if I look at our commercial businesses the second quarter was kind of a bottom. The third quarter was certainly better. October was the best and November will be better than October. So the length of the turn is good.

Analysts seem to buy Dell’s vision for the PC market pop, but question whether the company will hang with the competition. Barclay Capital analyst Ben Reitzes wrote in a research note:

We believe this earnings report will raise some concerns with investors, given Dell’s revenue trends are tracking well behind competitors in PC’s and even storage. Also, the quarter demonstrates significant margin volatility despite a $4 billion plus cost savings program. We continue to have long-term business model concerns for Dell but we do acknowledge that the company has a large exposure to corporate PCs which should see a pick-up in mid to late 2010. We continue to prefer HP and Apple for PC exposure (and) gaining share.

Comments

[notsosmart]

i would never deal with dell if i can help it.

2009 Nov 20 08:30 PM

[Gill Bates]

HA! living in a dream world/whistling past the graveyard; people will make do with XP or VISTA or switch to Mac (oddly still doing OK in this economy) by the MILLIONS for a year or two-even if 'happy days' in the economy started yesterday.
MICROSOFT is in for the real surprise of their life: people are going to say "pass" on spending precious cash on an antiquated, dying OS,-old, OLD wine in colorful new bottles as again people will make do with their current computer and or OS for a year-or two;
Anyone who looks at real economic indicators knows the worst is yet to come-so prepare, if not out of common sense then by necessity-this spend till you drop thing is what has ruined the country-and many lives;
I predict 2010 could be the end of Blu Ray-if things stay bad or get worse-if you read VIDEO BUSINESS and anecdotals-like many shops freezing, cutting back or even junking their BD rental sections alltogther: >90% DVD vs <10% of the pie is the reason-use floor space for what brings in volume; Or "Buy 1 BR-get 10 free!" sales cant be a good sign; DVD sales to date for 2009 are $7 Billion-vs $620 million BR-even DDL has left BR in the dust at $1.2 Billion in sales (VOD/DDL+Digital Download to own)

2009 Nov 20 10:05 PM

[ryanclarke]

Mr. Dell just popped roughly half his wad on Mr. Perot's computer networks that operate in Texas hospitals, that is, Dell spent tooooooooooo much on Perot, almost $4 billion, on a company which is going after the same gov't business as GE .... which is bad news because Dell's cash stash just took a big hit.


Also, don't forget this, www.dell.com/content/t... ... even though Dell's "bored" admitted the books were cooked a wee bit a few years ago ... which is why Rollins left and Dell came back ... I suspect the reason Dell was able to "wipe out" the mom and pop computer stores that used to sell their own "home made" assembled computers ... was because Mr. Dell hired some Enron accountants who used imaginary numbers to buy motherboards, video cards for FREE from the same Taiwan manufacturing companies the mom and pop computer stores used to purchase from as well.

But the final straw that will break Dell's stock is ... DELL DOES NOT INNOVATE. Dell is nothing more than the "front running" marketing company for Intel and Microsoft. In my opinion, there is little reason to buy a Dell box ... which has the same main board as HP which came from the same factory in Taiwan ... preloaded with Windows 7 when you could have bought a Dell Ubuntu OS box this year.

As far as Dell phones go ... they are way behind the curve ... which is why they were introduced in China and Brazil, first ... as these countries have "slower" cell phone networks.


Acer ... a Chineese .... ooooops I mean Taiwanese company ... will replace Dell as the "cheapo" way for the non computer geek to get the latest and greatest PC computer built around the latest and greatest Intel chip ... by no later than next year.

2009 Nov 21 01:26 PM

[Nettligent]

The worst has yet to come. As the economy drifts listlessly going into this holiday season, Microsoft Windows 7 or not, nightmares before Christmas in 2010 and beyond for Dell and tech companies. The unbearable pains are ahead.
Dell shareholders paying $3.9 billion for great synergy with Perot System is too expensive.
Both consumers and corporate spendings are going to be a big headache because they cutting spendings in 2010.
Rival Hewlett-Packard, Acers, Lenovo, Fujitsu, etc are very much aggressive to launch strong product lines at a very competitive prices. It will hurt Dell the most where it is the strongest.
Dell management and its Analysts are dreaming in the corner offices. Time to face a painful reality.

2009 Nov 22 05:17 PM

[Nettligent]

Microsoft Windows 7 = MS Windows Vista Service Pack 3 with many bugs fixes, security patches, window dressing and enhancements.
Microsoft is very good at keep selling junks to its customers and nobody put a little din on it.

2009 Nov 23 03:01 AM