Contact: Brenon Daly
As one indication of the distraction posed by the planned $24.4bn take-private of Dell, consider the blizzard of SEC paperwork coming from the company. Just in the past month, Dell has put in more than a dozen separate filings related to the planned management-led buyout (MBO). Amid all of the proxy amendments getting papered and chatter about who’s in and who’s out as bidders, it’s easy to lose sight of the fact that Dell (the company) is still doing business.
Of course, the company is doing business on a smaller scale, with Dell reporting high-single-digit revenue declines. Much of that slide is, rightly, attributed to the industry-wide slump in PC sales, which still account for about half of Dell’s total revenue.
But a more complete view of the company shows that while the box business continues to face pressure, the software division has yet to pick up the growth. While it may not be declining like the rest of Dell, the hoped-for boost in the business has yet to materialize. Software sales at the company, which still account for less than 3% of total revenue, are flatlining.
That’s a disappointment, given that Dell is now $5bn into its software shopping spree. It has acquired steadily and broadly, building its portfolio around information management, security and systems management. Much of the company’s software IP that it acquired – from the identity and authentication technology picked up with Quest Software to AppAssure’s backup software to the systems management tools from KACE Networks – got updated and highlighted at an event earlier this week in San Francisco.
Yet, despite all of Dell’s efforts (both organic and inorganic) to boost its software business, the division is stuck at $1.5bn or so in sales. Clearly, there’s more work for Dell to do in that unit.
If it needs a model, Dell can look across to IBM, a onetime box company that has successfully bought and built a software business. Big Blue’s $25bn software business hums along at twice the margins of its other major divisions. Further, software was the only division at IBM to actually post growth in 2012. Whatever the outcome of the proposed MBO, Dell could certainly use a contribution like that from its software group.
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