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A social media enthusiast, intrigued with numbers and toying with two completely contrasting propositions in B2B and B2C areas-1; Twitter CRM tool @tweepforce and 2: Entertainment tickets price comparison engine @tikbuzz.
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  • Dell Has Better Prospects Under Michael Dell Than Carl Icahn

    Dell Troubles Continues

    The recent pulling out of Blackstone from its bid to acquire Dell, after due diligence, siting the reason that the PC market is not a safe bet to play, raised further eyebrows regarding Dell's future and added insult to the injury caused by the Dell's on-going boardroom saga to assume company ownership. This story is making waves in both the financial and technology sectors.

    Initially, the main contenders were Michael Dell, Blackstone Private Equity Group and veteran venture capitalist Carl Icahn. Dell has joined hands with Microsoft and Silver Lake to buy back company shares at $13.65 and go private, whereas Icahn is offering $14.25 and the best proposal was from Blackstone at around $15/share. But Blackstone has dropped out from the race, mainly due to the tumbling PC market. Experts are also blaming Blackstone's recent low growth for their pull-out.

    (click to enlarge)

    For the business and technology world this has been in the offing for a long time, but to admirers of Michael Dell, who start his business from his garage as a teenager and singlehandedly turned it into a multibillion dollar business, it is a huge disappointment to see such a public company ownership fight! We have therefore analysed this further and tried to figure out where this beloved company might end up in five years' time!

    What went wrong with Dell?

    The very foundation of Dell as a company was laid on a strong supply chain and ecommerce model, where the company assembled PCs and hardware with very tightly run manufacturing units and sold them online. However, with the evolution of technology and increasing competition, the company somewhat lost its way.

    These are some of the ways in which this happened:

    And this all reflected in reduced turnover, falling share price and, unfortunately, unrest among shareholders. It also triggered a typical power struggle and gave an opportunity to parties with vested interests, including Michael Dell, Blackstone, and Icahn, to come up with separate new plans to reinvigorate the company.

    Michael Dell's Plan is to beef up R&D, focus on enterprise and emerging markets

    Since 2008, Michael Dell has taken back CEO responsibilities and he is pushing for high profit margin on PC sales and consolidating the enterprise offering with cloud, data storage, security and networking by buying appropriate add-on businesses. In a recent memo to shareholders he has insisted that the answer is to beef up customer services, R&D and Enterprise Selling to bring back to old glories. This is a summary of his memo:

    • Extend end-to-end information technology solutions capabilities.
    • Hire additional sales personnel.
    • Compete aggressively in emerging markets.
    • Invest for growth in the PC and tablet business.
    • Accelerate delivery of a simplified and enhanced customer experience.

    And Icahn will go for full divestitures

    Carl Icahn hasn't gone public with his plan,but if we believe in the rumours

    and Icahn's history, and that of private equity and venture capitalists taking over failing companies, the plan would probably be to break up the company by selling both sick (PC business) and money making (Dell Finance) units, in order to appease shareholders with some dividends, pay debt and focus on the potential cash cow i.e. the enterprise business!

    Experts like Carl Icahn's plan

    According to industry pundits, the Icahn offer is more practical as they do consider a number of factors, such as that PC market is dyeing, that Dell is perceived as a PC seller and Dell's liability and asset ratio to be important. Therefore it would be very difficult for Dell to revive all its businesses units.

    As well as this, Michael Dell's proposal to combine the R& D and Enterprise businesses might not be very fit in the short run, as designing a future product or cracking substantial business deals takes time.

    But Michael Dell has a point

    If we look at Michael Dell's proposal , it is aiming for long-term gain for both the business and shareholders. For example, for the PC unit he is targeting a high profit margin and inroads to emerging markets, and for the enterprise business a more end-to end solution with cloud, data storage, infrastructure setup and security.

    Some aggression may be needed from Dell

    The only issue might be that Dell is trying to do all of this in-house i.e. acquiring start-ups and creating offerings that could be lucrative in the long run; but in all this Michael Dell is forgetting that the biggest challenge is to quickly change public perception of the company in the aftermath of this very public power struggle. That can be achieved by strongly positioning the company in all sectors. For example:

    • In the B2C market, Dell should 'do an Amazon' i.e. leverage their supply chain and ecommerce capabilities to sell other products e.g. Smartphones, Tablets and TVs.
    • In the enterprise business, a tie-up with Microsoft, recently equipped withcxogs.com Skype, Yammer, SharePoint, BizSpark and Azure, to provide an end-to end cloud based low cost scalable solution.
    • On the R&D side, to beef up next gen products, 'do a Google'; Google bought Motorola Mobility to strengthen their mobile capabilities and Dell could buy a next generation patent from IBM, HP or Sony, and hire designers and engineers from Apple, Google or Facebook to quickly launch new products ranging from smartphones, to any wearable technology or even 3D printers.

    Overall, the company might be safe with Michael Dell but it needs an urgent overhaul

    For shareholders, the easy buy-in would be the Icahn offer, but I think Michael Dell deserves a chance as he knows business, he is backed by the right people (Microsoft) and his plan is also looking in the right direction. However he might need to quickly react to position the company beyond its image as a PC and server seller, by launching new product lines, tie-ups with some major enterprise players and leveraging the existing supply chain and ecommerce capabilities.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Tags: DELL, MSFT, IBM, Technology
    Apr 23 2:41 PM | Link | Comment!
  • Marissa Mayer Must Play Bigger Gamble Than Summly To Revive Yahoo!
    Yahoo

    Since Marissa Mayer took over Yahoo, shares are on continuous rise and behave gone from the slightly embarrassing price of $14 to a rather respectable $26. And all credit should go to her quick turnaround approach of product consolidation, management makeover, site revamp, acquiring new-generation start-ups and drive to remain top of the interest graph.

    Perhaps it is too early to form an opinion, but recent progress hasn't shown any real intent from Yahoo to indicate that they would really like to make inroads into the very social media and cloud oriented content generation world, as all these new developments are around enhancing their existing products and linking to Facebook or Microsoft, which rely more on content aggregation than crowd generation.

    So let's look more deeply at Yahoo's current situation, potential issues and what might help them to overcome these problems and bring old glory back!

    Yahoo is consolidating products and services, cutting costs and trying to acquire some new generation start-ups

    Marissa joined the company after the Jerry Yang boardroom wrestle and then the very untimely and embarrassing CEO (Scott Thomson) exit, but she is trying very hard to bring focus back to company's core competence and she and senior management indicated that Yahoo's objective is to create personalised and interest-focussed mobile content for users, so that display ads, the prime source of revenue, can continue to grow and give her and the company breathing space to decide their future direction.

    One undeniable fact that still hugely favours Yahoo that its home page is one of the most visited and where people spend the longest time, especially in the USA.

    But this is not enough

    Google has been doing it for many years and the rise of the likes of Facebook, Twitter and the now revitalized AOL as display ad networks means that Mayer knows that display advertising is a very competitive field and she needs some real wow factors to remain in the game long term. Therefore, she has already started exploring other avenues to increase shareholder value, ranging from cost cutting via senior management exits and staff redundancies, to discarding some non-profit products, trying to shed some shares from Alibaba, raising stakes in Yahoo Japan , buying start-ups like Summly, Pinterest-style news startup, Snip.it, video chat startup OnTheAir and Stamped; rumours about Zynga and Dailymotion are also circling around.

    Overall, Yahoo, with core competence around content generation and leveraging that via Yahoo Mail, mobile and web and vertical search, are determined to enrich their content factory, which may be a quick fix, but looking at current trends of content consumption or distribution from text, images, music , social network and/or video, Yahoo don't have any products or services in the top two or three options, which means the future is not that rosy until Yahoo/Marrisa Mayor come up with a product line that can stand out from others in this biz!

    What can Yahoo do to become a $10bn company?

    If Yahoo wants to regain top spot, they know they have to fight with new content generation tools like Facebook, Twitter, blogs like Huffington Post, and new generation vertical search engines like Kayak.com, TripAdvisor etc. Only acquiring content aggregating companies like Summly or some other start-ups might not be the long-term solution; rather they have to look to more cutting edge and matured companies such as:

    Yahoo do an AOL and buy Tumblr/Disqus

    AOL's revival is legendary. Tim Armstrong kept to basics i.e. generating content, but this time did something out of the box and bought new generation blogs like Huffington Post, TechCrunch and Engadget, which means they are very much in the social and interactive world and now in the top five most read categories for politics, sports, technology and others.

    If Yahoo buy blog hosting sites like Tumblr with over 200 million blogs, or comment generation tool like Disqus, they would have a very cutting edge solution to integrate their display advertising concept!

    Yahoo does a Google and aims for an enterprise presence by buying DropBox

    Even though Yahoo Mail is still a huge presence, they failed to materialise that in the enterprise arena and I think that, in the same way that Google drive mail and business apps, Yahoo must expand their offering to businesses. Perhaps buying a company like Dropbox, in the same way that Microsoft bought Yammer, could be the way forward?

    Yahoo buy a new generation of vertical search engines like TripAdvisor;

    Buy Yelp or FourSqare to provide some real-time location-based mobile services - this will give a huge boost to their mobile push;

    Buy WhatsApp or another new generation messaging tool.

    Like Microsoft with Skype and Google eying up WhatsApp, Yahoo should also jump into the race, as SKYPE, Twitter and WhatsApp have, and change the way we message now - Yahoo must grab this space before it's too late!

    Yahoo must bring search in-house

    Coming from Google, no-one knows better than Marissa that search is the trick to make bucks in the online arena, because search is about intent, not just interest, and intent to buy something can drive more money than just mere interest.

    Conclusion: Play big with $4.8bn cash - otherwise slow death

    Overall, Yahoo is great company founded on aggregating content and creating a one-stop shop portal along with Yahoo Mail and search. However along the road they missed the social, search and mobile boat which reduced them from one of the web giants to a company struggling to survive, and if Yahoo want to compete with Google, Facebook and Twitter now, they might have to take make some drastic changes like buying Tumbler, Dropbox, Zynga, Disqus, or Yelp, who can help them crowd source content and make inroads into the enterprise market. If they don't take a major step, some smart tech teamed with old-fashioned aggregation and directory structure will only lead to slow death.

    In other words Marissa Mayer is right to push for interest graph and mobile-oriented content but rather than banking on small start-ups, she must make a bigger gamble by buying established cutting edge tech companies and restoring the advertising space that used to belong to Yahoo, who had over $7bn turnover in 2008!

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Apr 23 5:54 AM | Link | 1 Comment
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