Michael Dell appeared on CNBC this week. Included in his generally optimistic comments about his business, Dell, which recently became a private company, were some comments about the PC business. Michael Dell spoke about the excellent potential for sales of very high contrast displays to the desktop PC computing market.
But back in March, 2013, in a document mysteriously titled Going private transaction by certain issuers Dell Corporation provided the US Security and Exchange Commission (SEC) with a voluminous (the PDF file is over 40MBs in size) set of information about management’s decision to take the company private. On page 242 of the 758 pages of this document, Evercore Partners, the investment bank and advisory firm, published a financial projection, through 2017, for the legal entity taking Dell private, “Denali”. By 2017 the BEST projection of the four included on the spreadsheet has the private company growing at an annual rate of 2.2 percent. So when I compare the two public statements, I can’t miss a striking contrast between them, and need to look a bit further into what’s causing the gap.
Back in March, when I added IBM’s revenue growth over the last 5 years (1.13%) into the mix, I couldn’t escape a difficult conclusion: Neither consumers, nor businesses using desktop computers appeared to be buying innovation. These markets seemed to be standing still.
But ISVs continue to innovate computing methods. The hot spots, back in March of this year, were the small mobile device hardware market. and the market for automated applications offered on a multi tenant model (cloud and SaaS). These conclusions are hardly news, but until we had a chance to look at the numbers, included in Dell’s explanation to the US SEC, we weren’t getting the message. Dell, IBM, HP, and their peers were just not growing.
In contrast, Apple demonstrated revenue growth of 45% over the last 5 years, Amazon 32.44% over the same period, and Salesforce.com by the same. Almost all of Apple’s growth is attributable to the small mobile device hardware market, while Amazon and Salesforce.com have done very well in the cloud and SaaS application area.
But Dell’s March, 2013 argument appeared to make sense. I couldn’t find much of a rosy upside for the business over the next 4 to 5 years. Evercore’s “Upside” Assessment depended on Dell successfully selling more premium desktop and laptop hardware. Selling more copies of Quest software products, or SonicWall firewall products, or even Wyse VDI technology just wouldn’t fill in the enormous revenue loss attributable to a substantially smaller market for PCs.
It all looked very grim to me back then. But now I find myself confused after Mr. Dell’s “glowing” remarks this week. Of course, the difficulties Salesforce.com, Amazon and Adobe are finding demonstrating profitability from cloud, SaaS products aren’t helping the notion of “go Cloud” as a universal panacea, either.
Finally, with Apple hiring the ex CEO of ultra high end Burberry’s retail operation to run “Apple Stores”, everywhere, there is certainly an increasingly clear image of an end to at least the high end of the smartphone/tablet market on my horizon.
Could it be the future of PC Computing isn’t really bleak at all?
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