Dell Inc.DELL

Morningstar Rating

Stock Research and Analysis

by Michael Holt

As the economics of the PC market deteriorate, Dell hopes to transform itself from a maker of commodity boxes into a trusted enterprise solutions provider on par with Hewlett-Packard HPQ and IBM IBM. This is the path to creating shareholder value, but Read more

Bulls Say

Dell is expanding its presence in enterprise technologies that will provide much stronger customer ties than the PC market.

Despite the challenging economics of the PC business, an efficient operational model allows the firm to churn out billions in free cash flow.

The EqualLogic acquisition appears to be paying off, as storage technologies generate strong growth, albeit off a small base.

We believe Dell's war chest gives it the opportunity to build its portfolio through additional technology acquisitions. Read more

Bears Say

Competitors like Cisco CSCO and HP are better positioned to capture the demand for high-end blade servers that is driven by the rapid adoption of server virtualization technologies.

We expect Dell's core PC market to struggle for the foreseeable future as price declines and gross margin pressure overwhelm unit volume growth.

Dell continues to cede market share to Acer, HP and Lenovo LNVGY.

The adoption of client virtualization and cloud computing could shift processing and storage from the client to the data center, reducing Dell's ability to differentiate its PCs. Read more

Strategy

Dell is distancing itself from its roots as a commodity PC provider. The firm has found corporate solutions--storage, servers, services--to be more profitable and more resilient than the consumer segment. Read more

Management

Michael Dell returned to the helm of Dell in 2007 after the company began struggling in the middle of the decade. He has since actively recruited experienced industry veterans from companies including IBM and EDS who should help drive Dell's transformation Read more

Profile

Nearly two thirds of Dell's revenue is derived from endpoint devices (PCs and related peripherals) for consumer and enterprise use. Dell provides notebook computers (31% Read more

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