This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Can Dell Buy Its Way Out of Irrelevance?

NEW YORK ( TheStreet) -- One of the most popular topics of discussion on Wall Street is that of computer giant Dell (DELL), and more specifically its future in the face of PC death.

It is broadly known that mobile devices from the likes of Apple (AAPL - Get Report), Google (GOOG - Get Report) and Amazon (AMZN - Get Report) have all but sealed its fate, sending Dell spiraling toward irrelevance. Making matters worse is the fact that its once-proud partner, software giant Microsoft (MSFT), has now essentially proclaimed it's every man for himself by deciding to enter the realm of hardware with its own Surface tablet -- effectively becoming a competitor. So what is left for Dell?

This is a question the company's management has been trying to answer for quite some time. The response of late appears to have been, "let's buy our way out of this mess." The company has gone on a shopping spree, spending $2.4 billion dollars to scoop up Quest Software (QSFT). This comes on the heels of its recent acquisition of SonicWall for an estimated $1.2 billion. Let's not forget that is also acquired Wyse Technology earlier this year, KACE Networks in 2010 and Perot Systems in 2009.

It seems the company is thinking it needs to build its software portfolio by buying up niche companies to offset its fledging hardware/PC businesses which are now rapidly deteriorating. Is the strategy working? I don't think so. Nor do I think the company has put enough thought into its acquisitions.

Dell's recent acquisitions were broadly intended to improve its footprint in enterprise. However, if PCs are indeed dying as evidence suggests, then what sense does it make to acquire companies and systems that support PCs?

The company's challenge is finding new ways to grow its high-margin segments, which include networking and storage. It also has to figure out ways to better leverage these recent acquisitions to synergize with its existing businesses and address a new mobile strategy. This is the only way it can effectively fight back.

The company should embrace the idea that mobile devices aren't going anywhere and realize that Apple and Google are not going to rest until they reach their level of dominance. With that in mind and considering where and how it has been spending its cash, it can immediately become relevant by buying an existing mobile specialty company -- one with an existing enterprise brand similar to its own. To that end, the only acquisition that makes this type of sense is Research in Motion (RIMM).
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
DELL $0.00 0.00%
AAPL $93.74 0.00%
AMZN $659.59 0.00%
GOOG $693.01 0.00%
FB $118.00 1.10%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs