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NEW YORK (

TheStreet

) -- The death of the PC market won't kill

Dell

(DELL) - Get Dell Technologies Inc Class C Report

, thanks to the company's recent M&A strategy.

A string of unheralded 2012 acquisitions -- to go with three years of M&A in software and data security markets --

is helping

Dell distance itself from peers and from its bread-and-butter PC business, positioning the company for improving operating margins and earnings per share. That comes as analysts expect long-term profitability declines in its core PC business.

Wall Street increasingly likes what it sees in the Dell M&A strategy.

On Monday, Morgan Stanley analyst Katy Huberty upgraded Dell's shares to "equal weight" from "underweight," on expectations that the company's recent acquisitions will help it generate earnings that are in line with the tech sector, rather than underperforming peer PC makers like

Hewlett Packard

(HPQ) - Get HP Inc. Report

. Now Dell can be expected to show similar performance to tech giants like

IBM

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and

Seagate Technologies

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In the past six months, Dell's shares have gained just over 1% to $16.38, a stronger return than Hewlett Packard, which has experienced a near-10% drop. Tech companies geared to networking, data security and virtualization, like IBM, EMC and Seagate Technologies, have posted double digit stock gains.

"

Our more positive view is a function of both potential EPS upside and the recent acceleration in acquisitions which show the company is taking action to address its past market underperformance and high exposure to secular pressures in the consumer/PC business," wrote Huberty in a note to clients.

Through acquisitions over the last three years, Dell has added $4 billion in revenue from higher margin and faster growing businesses outside of the company's PC and server operations, which still account for roughly two-thirds of overall sales. In 2012, Dell's M&A pace has quickened, with the company adding $600 million in new non-PC sales in a flurry of deals. "Over the next several years, these acquisitions could drive Dell toward our bull case 9%+ operating margin and $2.70 EPS," says Huberty.

While Dell has been reluctant to disclose the price of recent acquisitions, including data protection specialist

SonicWall

, virtualization software maker

Wyse Technology

and

AppAssure Software

, a maker of backup protection software for cloud infrastructure -- the deals push Dell into markets that are expected to yield higher growth and profit margins than PCs and servers. In the U.S., PC sales fell nearly 5% in 2011, according to research firm

IDC

. Meanwhile Dell, the world's third largest PC maker, expects its computer sales to fall 7% in the first quarter.

Acquisitions give Dell the potential to improve gross margins by over 20% and operating margins by 9%, even if PC margins fall as much as 5% annually over the next few years, adds Huberty. While storage, networking and services businesses will be the drivers, Dell will still be challenged to grow its overall revenue, which grew less than 1% to $62 billion in 2011.

Prior to Morgan Stanley's upgrade, Dell has shown signs of being an aggressor in stealing market share from the likes of IBM and Hewlett Packard, which is struggling amid a restructuring of its PC operations and the integration a $10.3 billion acquisition of British software giant

Autonomy

.

As Dell targets deals outside of its PC business, the company's now bolstered IT services business is showing promising signs, with management signaling a sustained commitment.

"There is an opportunity for us that is generated by the turmoil and uncertainty at one of our major competitors," CEO Michael Dell told

Bloomberg

in October of possible acquisitions stemming from HP's woes.

Sales at its data storage and networking unit rose 5% in the fourth quarter. Meanwhile, February data distributed by

Gartner

showed Dell gaining a 14.8% server market share from 13.1%, cutting at the over 30% market shares of larger competitors IBM and HP. It was also the only vendor among the top 5 server suppliers to show revenue growth.

In an April research note BMO Capital markets analyst Keith Bachman notes that Dell is expected to continue taking server market from Hewlett Packard. "HP, Dell, and IBM, will garner around 75% unit share throughout our forecast period, with Dell and IBM taking some share from HP."

Meanwhile, the acquisition of SonicWall, a market leading firewall and security leader may also put Dell in competition with new competitors like

Check Point Software

(CHKP) - Get Check Point Software Technologies Ltd. Report

,

Juniper Networks

(JNPR) - Get Juniper Networks, Inc. Report

and

Cisco

(CSCO) - Get Cisco Systems, Inc. Report

, says FBN Securities analyst Shebly Seyrafi.

"The deal allows Dell to play in the next generation firewall market, but we believe that it will compete against leaders such as CHKP and Palo Alto Networks primarily, and against FTNT, CSCO, JNPR, and INTC/McAfee secondarily," wrote Seyrafi in a March note.

In February, Dell unveiled a new line of business servers called PowerEdge that will integrate with its storage gear products and speed up computing tasks for customers. Those servers, networking and data storage products accounted for 31% of Dell's $16 billion in fourth quarter sales.

Dell missed fourth quarter estimates on falling demand for PCs, a unit that comprises over 50% of overall sales, but that is falling as a percentage of revenue. Meanwhile, sales at its data storage and networking gear unit rose 5% in the fourth quarter; a services unit for small and midsize businesses also got a 6% boost.

Overall, analysts polled by

Bloomberg

give Dell shares a price target of $19.29 on 16 "buy" recommendations, 17 "holds" and three "sells." Those analysts expect Dell to report revenue of $14.9 billion and a profit of $735 million, when it reports first quarter earnings on May 22.

For more on Dell shares, see why

Dell needs drastic action

. For more on technology M&A, see

5 tough sells in the tech sector

.

-- Written by Antoine Gara in New York