Shulou(Shulou.com)11/24 Report--

After the successful transformation after privatization and delisting, Dell Technology, which has been re-listed, once again encountered a growth bottleneck.

1. From the king of PC to delisting at 19, dropping out of school to start Dell, becoming the richest man in Texas at 32, retiring at 39, and returning to the mountain at 42. Speaking of Silicon Valley legends, Dell founder Michael Dell is undoubtedly one of the most important.

Michael Dell founded Dell computer in 1984 at the age of 19 and produced the first computer, the Turbo PC, in 1985. With its original direct selling model and efficient supply chain management brought about by customized production, Dell computer Company has developed extremely rapidly.

In 1988, Dell successfully landed on NASDAQ and raised US $30 million in its initial public offering. Since then, Dell began to open sales offices in France, Switzerland, Ireland and other European countries, and established an European manufacturing center in Ireland. With its rapid growth in the global market, Dell's revenue grew at an average rate of 97% and its net profit grew at an average annual rate of 166% throughout the 1990s.

In 1998, Dell surpassed IBM to become the second in the world in the PC industry; in 1999, Dell replaced Compaq computer to become the largest seller of personal computers in the United States; since 2001, Dell has occupied the first position in the world for five consecutive years, and has been rated as the first of the "100th Giant Enterprises" by BusinessWeek. Among them, although Hewlett-Packard relied on the merger and acquisition of Compaq to take the lead temporarily, it was still difficult to beat Dell in the end.

In 2002, Dell's market capitalization exceeded 100 billion US dollars and the company reached its heyday. Two years later, the successful Michael Dell chose to step down as CEO to become a generation of legendary entrepreneurs.

However, with the increasing saturation of the PC market and the rapid advent of the mobile Internet era, Dell, which is too dependent on the PC market, is gradually facing pressure from the ceiling. To this end, Dell began to expand its product line to servers, laptops, storage, printers and other areas. In 2003, Dell computer Company officially changed its name to Dell.

However, Dell's aggressive expansion of the non-computer sector seems to have affected its focus on the main business. Since 2005, Dell's global image has been seriously damaged by the "explosion door" and "core door" incident caused by the laptop explosion and fire. Since then, Dell was mired in a financial fraud scandal in 2006 and was eventually fined $100 million.

After a series of negative events, Dell's sales in the PC field plummeted, and Hewlett-Packard took away the title of global PC. In January 2007, Michael Dell returned to the helm of the company and began a series of strategic adjustments. However, after a series of changes such as layoffs and diversification, Dell is still not out of the woods. In 2012, Dell's net profit plummeted 70%. In 2013, Dell announced a $24.4 billion privatisation and delisting.

2. Strategic transformation and secondary listing in fact, the direct selling model has always been a magic weapon for Dell's early and rapid development. With the original direct selling model, Dell can not only remove the profits of intermediate channels to sell products directly to consumers at low prices, but also purchase and produce according to orders, which greatly reduces the pressure of inventory and the cost of capital.

However, as the IT industry matures and the profits of hardware products become thinner and thinner, the low-cost advantage of Dell's direct selling model is gradually disappearing. On the other hand, with the continuous expansion of product categories and the increasing expansion of sales scale, Dell's fixed production model brings increasing pressure on supply chain management, and even leads to serious functional disorders of production planning.

On the other hand, unlike contemporary technology companies such as IBM, Microsoft and Apple, Dell's success at the end of the last century and the beginning of this century depended not on core technology, but on business model innovation, laying the groundwork for its future decline.

After Michael Dell returned to the helm of the company, he was determined to break the shackles and deadlock brought to Dell by the direct selling model, and began to pay attention to the channel merchants and distribution customers in the channel strategy. Data show that five months after Michael Dell returned as CEO of the company, Dell signed 10-20 key agreements with major global vendors to sell Dell products in channels and stores around the world. At this point, Dell officially ended more than 20 years of selling computers to individual users only by telephone and the Internet.

In addition to positive channel change, Michael Dell also decided to push Dell to transform into the enterprise IT market. To this end, Dell has acquired dozens of enterprise software and service companies one after another. In September 2016, Dell completed the acquisition of EMC, a famous data storage manufacturer, for $67 billion, and the new company was named Dell Technology Group.

According to information, EMC, founded in 1979, is the world's largest enterprise data storage vendor, providing customers of different sizes in 180 countries with innovative product portfolios and services ranging from client to data center to cloud. In addition to cloud computing storage technology, EMC's VMware has industry-leading virtualization technology that simplifies servers and saves costs.

It is worth mentioning that Dell was valued at about $24.4 billion when it was privatized, while the EMC deal was worth as much as $67 billion. With this "snake and elephant" merger, Dell has become the dominant player in enterprise data storage, with a market share of more than 35%. At this point, Dell has been transformed into a technology company that integrates infrastructure, server, storage and data protection software and hardware, and has the strength to compete with competitors such as IBM in software services.

After a magnificent turnaround from a traditional PC manufacturer to a world-class infrastructure company, Dell Technology re-entered the New York Stock Exchange through backdoor on December 28, 2018, which became a major news event in the global technology community that year.

3. The way forward: after the re-listing of both opportunities and challenges, Dell Technology has further accelerated the layout of storage, network, cloud computing and other service areas, continued to promote product updates and upgrades, and formed seven major business groups, including Dell computer (Dell), Dell EMC, Vmware, Pivotal, Secureworks, RSA and Virtustream, and achieved steady growth in operating performance.

Data show that in the fiscal year 2019-2021, Dell Technology's annual revenue was $90.62 billion, $92.15 billion and $94.2 billion, respectively, showing a steady growth trend. In the past fiscal year 2022 (February 2021-January 2022), Dell Technology's revenue exceeded the $100 billion mark for the first time, with an operating profit of $4.7 billion, an increase of 26% year-on-year, and a 12% year-on-year increase in operating profit of $7.8 billion.

Meanwhile, Dell's total market capitalization, which reached $44 billion at the start of the year, has nearly tripled in the three years since its secondary listing. Michael Dell is still among the top 20 richest people in the United States with a fortune of $50 billion, according to the latest Forbes 2022 ranking.

Today, Michael Dell, 57, is still in charge of the restructured Dell Technology Group and the listed virtualization software giant Vmware, while his contemporaries Larry Ellison and Bill Gates are retired or old.

However, although the transformation of Dell technology has achieved certain results, the future development of the company is not a smooth road.

On August 26, Dell reported results for the second quarter of fiscal year 2023 that ended in July. Data show that Dell's revenue in the second quarter was $26.43 billion, up 9% from a year earlier, the highest in the second quarter, but due to surging business costs such as data centers and cloud services and a decline in gross profit margins in its main business. Dell's second-quarter net profit fell 43 per cent year-on-year to $506 million.

Notably, Dell also downgraded its performance guidance for fiscal year 2023. Tom Sweet, Dell's chief financial officer, said on an earnings call that the company expects third-quarter revenue of $23.8 billion to $25 billion and adjusted earnings of $1.53 to $1.79 per share. By comparison, Dell earned $2.37 per share on revenue of $28.4 billion a year earlier. Sweet also said Dell expects revenue for fiscal 2023 to be flat or 2 per cent higher than $101 billion a year earlier.

Dell's share price is clearly under pressure from a decline in net profit and a cut in its full-year earnings guidance. Dell technology shares fell 13.51% the day after the results were announced, and have continued to decline ever since. Dell's shares closed at $34.26 as of Oct. 15, down nearly 40% for the full year of 2022.

By business category, Dell Technology's main business is divided into client Solutions Group (CSG) and Infrastructure Solutions Group (ISG), with a revenue share of about 6:4. Among them, client Solutions Group mainly sells personal computers and related hardware, while Infrastructure Solutions Group mainly sells IT hardware such as computer servers, storage systems and network equipment.

In the second quarter, the customer Solutions Group had revenue of $15.49 billion, up 9 per cent from a year earlier. Of this total, consumer revenue was $3.349 billion, down 9% from a year earlier, mainly due to weakness in the consumer electronics market.

At present, the weakness of global PC sales continues. On October 11, Canalys released a report on global PC shipments for the third quarter of 2022, showing that global PC shipments in the third quarter were 69.4 million units, down 18% from the same period last year, the biggest decline in 10 years. Among them, Dell, which ranked third, shipped nearly 12 million units, a decrease of 21%.

Stimulated by COVID-19 's epidemic, the surge in demand for online office entertainment has brought about a short-term high growth in the PC market. However, with the saturation of overall demand and the decline of marginal effects, the PC market has been turning downwards since the fourth quarter of last year. To this end, Dell has made infrastructure solutions business the focus of its efforts.

In the second quarter, Dell Infrastructure Solutions Group's revenue was $9.536 billion, up 12% from a year earlier, including server and network revenue of $5.209 billion, up 16% year-on-year, and storage revenue of $4.327 billion, up 6%.

Since the beginning of fiscal year 2023, Dell Infrastructure Solutions Group business has maintained double-digit growth for two consecutive quarters. However, data centers and cloud services have the attributes of high investment and high cost, and the gross profit margin of Dell's technology infrastructure solutions business is obviously not the same as that of PC business. According to the mid-fiscal year 2023 data, Dell Technology's gross profit margin was 21.36%, down nearly 10 percentage points from the same period last year (30.91%). Obviously, the decline of gross profit margin has become one of the main reasons why Dell Technology does not increase profits, and it is also one of the challenges that Dell Technology urgently needs to deal with.

This article comes from the official account of Wechat: Guishi Business Review (ID:libusiness), by Li Ping

Welcome to subscribe "Shulou Technology Information " to get latest news, interesting things and hot topics in the IT industry, and controls the hottest and latest Internet news, technology news and IT industry trends.