Dell needs to reassure customers after going private

News 6 Feb, 2013

Gartner tells Dell users to ignore rivals' fighting talk.

Hardware giant Dell needs to make a definitive statement of intent soon to stop its rivals spreading fear, uncertainty and doubt among end users about its decision to go private.

The company confirmed rumours that it was set to go private yesterday in a $24.4 billion deal involving Dell founder Michael Dell, software giant Microsoft and private equity house Silver Lake.

The buyout is reportedly part of Dell’s ongoing quest to expand away from its PC-making roots, and reposition itself as an end-to-end provider of enterprise IT products.

News of the deal has already prompted the company’s arch-rival HP to declare that it plans to capitalize on Dell’s privatisation by going after its customers.

In a statement to Forbes, HP said Dell has a “very tough road ahead” and faces an “extended period of uncertainty” that will be unsettling for customers.

“Leveraged buyouts tend to leave existing customers and innovation at the curb...[and] we believe Dell’s customers will now be eager to explore alternatives and HP plans to take full advantage of that opportunity,” the HP statement concluded.

Adrian O’Connell, research director of analyst firm Gartner, said the deal is likely to be a source of concern for Dell customers, but they should wait until it completes before paying heed to what the firm's competitors have to say.

“HP issued that statement, and there is going to be an awful lot of fear, uncertainty and doubt that other vendors throw around [in the wake of this deal], so it’s really up to Dell to reaffirm its strategy to customers as soon as possible to really articulate what its priorities are going forward to ease any customer concerns,” he said.

News of the deal has prompted some industry watchers to speculate whether, in light of the ongoing decline in PC sales, Dell will seize on this to exit the personal computing market or call time on its more consumer-focused product lines.

Carter Lusher, chief IT analyst at fellow market watcher Ovum, said: “The implication of going private is that Dell is planning radical changes to its strategy and product road map.

“While the company might come out of this transition stronger...there will be uncertainty as to what products and services stay, get strengthened or eliminated.”

However, O’Connell said he doubts this means Dell will call it quits with PCs, but said that doesn’t mean a “pruning” of its product lines won’t be on the cards.

“There has been a lot of assumptions that [this deal] means Dell is going to break things up and get rid of the PC business, but that’s not necessarily a given, though,” he said.

“I think it might be over simplistic to say this will mark the end of PC making for Dell...because that [part of the business] is of tremendous importance to their revenue and cash flow."