Analysis: Worst nightmare for Dell, Microsoft?

Feb 11, 2013 by Scott Martin, Usa Today

Microsoft CEO Steve Ballmer's worst nightmare might go like this: PC juggernaut Dell becomes downtrodden enough to be private equity bait and Apple so rich investors sue to get at its cash.

But this is no dream; the technology landscape's transformation is unfolding in ultra-high definition. is going private in a $24.4 billion leveraged buyout after years of struggling to regain PC-maker dominance. , which could never snare more than a slice of the market-share pie despite awe-inspiring design and PC genius, is so device-revenue rich that shareholders are lawyering up to get at its mountain of cash.

's decision to let private equity investors pick apart his namesake brand is the biggest concession to date of a battered industry. Dell's largest shareholder is frustrated enough to try to thwart the former 's rehab strategy: retreat from a low-margin business to fashion a blueprint for success in a world where smartphones and tablets are the "PC" of choice.

The morphing of Apple from David into Goliath is complete. While Dell needs capital and innovation, Apple is afloat in a sea of cash and content consumers. The pirates are circling. On Thursday, billionaire David Einhorn's Greenlight Capital filed suit to force Apple to to divvy up a portion of its $137 billion cash treasure chest.

It seems like eons ago that Microsoft founder Bill Gates was beamed up on the MacWorld Expo stage to offer Apple visionary Steve Jobs $150 million and merciful promises to ship future Office software to Macs. The year was 1997.

The most contrarian of forecasters could not have foreseen that Dell or Ballmer would devolve into two of the tech world's laughingstocks. Ridiculing Apple's unwillingness to join the PC herd was only one of the signs of overbearing hubris.

The iPhone's debut elicited chuckles from Ballmer: "I said 'man, that is the most expensive phone in the world,' and it doesn't appeal to business customers because it doesn't have a keyboard."

Dell, upon learning that Jobs had humbled himself and taken Gates' handout, had a few words of advice about Apple: "What would I do? I'd shut it down and give the money back to the shareholders."

Fast forward to 2013 and Dell is getting a $2 billion helping hand from Microsoft to give the money directly back to stockholders at $13.65 a share, rather than plowing it into the company's future.

For Ballmer and his once-arrogant cohorts, the nightmare's sequel is already in production as the clock ticks on Hewlett-Packard's future in PCs.

Stay tuned.

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User comments : 9

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packrat
3 / 5 (2) Feb 11, 2013
Microsoft is still the worlds leading software company and Dell still makes some of the most affordable computers on the market. I don't see a lot of hubris there. Dell has probably already sold more computers than Apple ever will.
xen_uno
3.7 / 5 (3) Feb 11, 2013
I don't care for either .. MS for it's increasingly dumbed down, bloated, toy like OS's and Dell for it's highly proprietary designs. I'd rather buy comp parts from newegg and install good ole XP and/or Linux. MS Office hit it's zenith 10 years ago in 2003, since then all "improvements" have been just annoying interface changes.
ValeriaT
not rated yet Feb 11, 2013
MS Office hit it's zenith 10 years ago in 2003, since then all "improvements" have been just annoying interface changes.
Much of MS Office functionality remains hidden for non-corporate users (work with PivoTables & OLAP services, support of databases and SharePoint data storage). I admit, I'd appreciate the support of double interface (i.e. separated for tablets and classical PCs).
FMA
not rated yet Feb 11, 2013
I just brought a desktop PC last week, the salesman said that there are fewer and fewer people like me buy a desktop PC, from selecting the PCB board to case, only those need the PC to do the documentation and office works which require low grade CPU and other basic hardware.

The trend is really changing!!
phi-stee
3.7 / 5 (3) Feb 12, 2013
This author might be the biggest shill for Apple that I've read in a while. So much for "neutral" journalism.
frajo
not rated yet Feb 12, 2013
The morphing of Apple from David into Goliath is complete.

Android.
antialias_physorg
1 / 5 (1) Feb 12, 2013
fewer and fewer people like me buy a desktop PC

The low-end PCs are more than enough for work applications.
Most casual use for the PC is internet related - and for that most people never need a keyboard (so they go for tablets or somesuch)

The only people buying serious PCs these days are gamers and developers.

Times change. I'd say it's about time those big, ugly boxes vanished from homes
(though personally I can't really see going without a developer PC - at home and work - for quite some time, yet)
GSwift7
not rated yet Feb 12, 2013
Microsoft might have an extra card up its sleeve though; They are rumored to announce the next XBox system this year. They have the desire and potential to revolutionize things in the home entertainment market.

The significance of that is that the home entertainment market is enormous compared to the PC/Tablet/Cell market. I mean, EVERYONE watches television. The advertising revenue is more money than these companies are all making combined. If Microsoft can get a piece of that advertising money as well as online sales revenue, as they have stated they intend to do, then they are in no danger of being out-performed by Apple.

Besides, as posted above, Apple is being outsold by Droid devices globally now. If that trend continues, they will have trouble in the future. They make a lot of money from their closed propietary marketplaces like iTunes. Competition in that space will be very tough on them in coming years. Teens won't pay $1-2 on iTunes when they can pay half on Google Play
xen_uno
5 / 5 (1) Feb 12, 2013
I love "big ugly boxes" ... mid to full sized towers with an adult sized MoBo and plenty of expansion slots. Laptops/Notebooks/Smartphones are just toys to me .. not meant for serious work.