Dell: The Erstwhile PC King Aims for the Middle

Five years ago, Dell lost the title of world’s top PC maker to its longtime rival, Hewlett-Packard. So when HP surprised the world by announcing it would consider divesting its $41 billion PC business, Dell’s founder and chief executive officer, Michael S. Dell, quickly took to Twitter. “Goodbye HP,” he wrote. “Sorry you don’t want to be in PCs anymore.” He expanded on his message in late August. “We like the PC business, and we’re staying in it,” says Dell, 46.

Whether No. 1 or No. 2, it’s a dubious distinction to be one of the biggest suppliers of machines now considered products of a bygone era, as the computing world moves onto tablets and mobile devices. But Dell sees the business he once dominated as a springboard to greater things. Through a string of 10 acquisitions in less than two years, Dell has branched into areas such as IT services, computer networking, and data storage. He thinks the kind of low-cost, low-margin hardware Dell is known for—the company sold about $39 billion worth of desktops, laptops, and related products last year—can open the way for sales of higher-margin enterprise products. At the same time, and in a nod to reality, Dell is winnowing its troubled line of consumer products and focusing its attention on the small- and medium-size businesses and government agencies that already account for more than half its sales. “Some of this we kind of did to ourselves,” says Dell. “We are consciously pruning the business [and] replacing a lot of low-margin revenue with a lot of high-margin revenue.”