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Dell Gets Ready to Go Private: What Does it Mean for Professional Workstation Users?

PC maker Dell prepares to go private. Founder, chairman, and CEO Michael Dell (shown here at Dell World 2012 opening party, image courtesy of Dell) calls the transaction "an exciting new chapter for Dell."

The PC market is dominated by just a handful of major players. It’s literally a single hand, as five brands — Dell, HP, Lenovo, Acer, and ASUS — account for 58.9% market share (“Gartner and IDC: PC shipments tumbled…,” October 10, 2012, engadget). The rest is made up by specialty brands. Naturally, in such a tight market, a major strategy shift by one of the Big Five is bound to produce ripple effects.

Last week, publicly traded Dell began taking steps to go private — an option the company’s founder, chairman, and CEO Michael Dell described as “an exciting new chapter for Dell” in a press release. According to the company, Dell has “signed a definitive merger agreement under which Michael Dell, … in partnership with global technology investment firm Silver Lake, will acquire Dell” in a $24.4 billion transaction.

In the last few years, the PC market faced significant pressure from mobile devices and smartphones, which emerged as better alternatives for certain operations previously possible only on desktops, laptops, and workstations. The lighter, portable form factors are part of the appeal. According to data from analysts Gartner and IDC, the PC market dropped 8.3% between Q3 2011 and Q3 2012.

In 2011, in what some considered a misguided move, Dell’s rival HP pondered getting out of the PC business altogether. At the time, HP’s then CEO Leo Apotheker argued it made more sense for the company to focus on software, services, and specialized hardware for enterprises, like IBM does. Later HP reversed course and remained in the PC business.

Part of the PC market is the workstation market, accounting for primary systems engineers and designers rely on for their work. Even though the PC market’s anticipated growth looks grim statistically, Lloyd Cohen, IDC’s director of Worldwide Market Analysis, has a sunnier outlook for the workstation sector. He noted, “The workstation market has returned to healthier growth rates as users have begun to refresh their aging workstations. At the same time, vendors have introduced workstations offering several different processors, such as i3, i5, and i7, thereby increasing the selection of machines that can satisfy specific workload applications without wasting part of their IT budget on unnecessary features” (Worldwide Workstation 2011–2015 Forecast,” IDC).

Lauren Mauro, Dell’s communications manager for commercial clients and OEM solutions, said, “The agreement [to go private] doesn’t change our go-to-market strategy. By becoming private, we can more effectively proceed and execute our strategy.” Mauro added, “End user computing, which includes consumer PCs, business clients, and workstations, is an important part of our business. We’ll continue to invest in its growth.”

The transaction is financed in part by Microsoft with a $2 billion loan. With a vested interest in the shrinking PC market, both Microsoft and Dell know their fate are tied. Windows is also the primary OS in the engineering and design software market, the backbone of CAD, CAE, and CAM. Consumer PC market faces invasion from mobile devices. The professional workstation market faces the same threat, but to a lesser extent, as designers and engineers need powerful workhorses to perform compute-intense visualization and simulation tasks — a need the current generation of mobile devices cannot meet.

Even though the workstation market is usually treated as a separate division by PC makers, and is relatively insulated from the encroachment of mobile devices, it’s not completely immune from the behaviors of consumer PC buyers. The spill over effects from consumer PC market should not be underestimated.

Currently, multicore workstations with powerful graphics accelerators remain the only appropriate systems for power-hungry professional designers and engineers. The increased size and complexity of assemblies also push the demand for parallel processing, only available in workstations and high-performance computing (HPC) servers. However, users’ flirtation with cloud computing, remote desktops, and other innovative computing modes could redefine the role and importance of workstations.

Away from the constant scrutiny of financial analysts and performance-obsessed Wall Street, a privately owned Dell is expected to be more nimble, more responsive to technology buyers’ changing computing preferences.

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About Kenneth

Kenneth Wong has been a regular contributor to the CAD industry press since 2000, first an an editor, later as a columnist and freelance writer for various publications. During his nine-year tenure, he has closely followed the migration from 2D to 3D, the growth of PLM (product lifecycle management), and the impact of globalization on manufacturing. His writings have appeared in Cadalyst, Computer Graphics World, and Manufacturing Business Technology, among others.

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