I have never used ASAP and I wouldn't use them in the future. I wouldn't use any Dell-owned company unless I had to as an absolute last resort to meet the needs of my client…They have acted anti-channel for such a long time that saying they are embracing the channel doesn't cut it for me, nor will it ever.
We are getting in a mode now where we really do have a rhythm of how to acquire and integrate companies.
SecureWorks is a recognized industry leader in information security services and its offerings and expertise will immediately enhance our solutions portfolio.
Compellent is a natural complement to Dell's expanding enterprise storage portfolio. The Compellent storage platform will enable Dell to provide customers additional mid- and high-end network storage solutions that simplify and reduce the cost of data management.
Although Trefis has a different take on the fair valuation, price, their models offer insight into the revenue streams of Dell. Take a look at their revenues, and you will see what I mean. Despite their string of purchases, two thirds of their revenues come from commoditized items. It will take time to build storage, even though it is experiencing great growth in that part of the business. Another opportunity is obviously tablets, but the market is so young that one bad product could ruin the company's name. I think it will be a player in the tablet market, but margins will be under downward pressure in less innovative units.
Future of Dell
Given the recent string of acquisitions, one could probably convince one's self to be optimistic about the future path of this stock. However, I believe it is too little too late for Dell in this sphere. Usually its large chest of cash would represent a competitive advantage over smaller rivals, but in this case it is going head to head with companies like HP, Cisco and IBM, which have similar loads of cash to bid on promising tech. Furthermore, these cash-laden giants already have a great name to build on, something that Dell lacks in anything other than PCs. In enterprise IT, the relationships are the currency of the business. If Dell wants to try to disrupt a successful relationship between, say, Cisco and a client, it will have to offer something compelling. I don’t think it has enough differentiators in its arsenal right now.
Additionally, if this transformation is going to succeed, Dell will have to take time and not get too greedy in its spending spree. That means taking a break if the price isn’t right, and focusing on building the synergies from previous acquisitions. I don’t believe Wall Street will allow Dell to do that. A lack of acquisitions may signal a lack of growth, and the sentiment could turn sour.
Dell is expected to earn 36 cents a share on $15.73 billion in revenue, which would be a sizeable jump from 17 cents a share on $14.9 billion last year. I am confident releasing my valuation before the earnings call, because I don’t think the long-term value of Dell relies as much on the present as it does on the future. Given the competitive landscape surrounding it in both PC and enterprise IT markets, I believe that Dell will struggle for the medium term to gain a foothold and compete. That being said, with such an incredible opportunity as the cloud forming in the tech sector, Dell is positioning itself to get a piece of that pie. A couple of prescient acquisitions could change the story, but for now I believe their PC business will hold it back from attaining its goals of higher growth. So, I am confident in giving Dell a price floor of $10 and a ceiling of $17. This is obviously pre earnings, but I see nothing on the horizon that could materially change my window of opportunity for Dell.
Insiders are pretty optimistic about this company, with an average of over three million shares being bought the last two years. Michael Dell also has almost a 12% stake in the firm, which would align the long term interests of the company with his own. However, I believe at the present time Dell is going to be hamstrung by an aging PC market.
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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.