Dell Lays Out 4-Point Plan For Post-Buyout Road Map

After winning a bruising leveraged buyout vote on Thursday, Dell executives laid out a road map for its future as a private company that includes continuing to make commodity PCs and tablets, doubling-down on enterprise solutions and growing its PartnerDirect program.

Dell's plan, outlined Thursday during a press call, doesn't deviate significantly from the company's long-stated priorities; Dell's goals have been the same for years.

The difference is that under the new ownership structure, Michael Dell will be able to move his company more quickly on that strategy, wrote Brenon Daly, analyst with the 451 Group, in a research note. Daly added that Dell's "LBO doesn't actually change much at the company. For the most part, the LBO is a financial event, rather than a strategic one."

[Related: It's Official: Dell's Top Execs Sound Off On $24.9 Billion Buyout ]

But, what Michael Dell and Dell's CFO Brian Gladden said Thursday answered questions that have been percolating up from Dell partners who have been wondering what's next.

"In taking Dell private, we plan to go back to our roots," said Michael Dell. With the leveraged buyout, the success or failure of Dell as a company will rest on Michael Dell's shoulders. After regulatory approval, expected to be finalized Nov. 1, Michael Dell will own 75 percent of the company, with investment partner Silver Lake as a minority shareholder.

"Dell is well positioned to move forward," said Charles King, principal technology analyst of Pund-IT. That's not to say it's going to be easy, he added. King said that the road map Dell outlined Thursday reflects the same challenges facing IBM, Hewlett-Packard and other competitors.

Here's a breakdown of the four initiatives that make up Dell's road map as it moves forward as a private company.

Initiative No. 1: Build PCs

For Dell's PC division, not having Wall Street looking over its shoulders will allow it to compete fiercely with arch-rival HP and IBM. Dell has been gobbling up market share in the server space for the past several quarters. According to IDC second-quarter server data, Dell's worldwide server unit shipments rose, whereas rivals HP and IBM's sank. Dell, with 28.6 percent share, is only 2.5 percentage points from overtaking market share leader HP with 30 percent share.

Dell will likely continue on its recent and successful strategy to reduce PC and server prices to gain market share at the sacrifice of profits, analysts say. Dell has said in the past that 50 percent of all of its enterprise sales come from customers of its PC and servers.

Gladden said Thursday: "We are going to be investing in growth in PC, tablets and virtual computing markets. Despite the contractions in global PC demand, continued leadership is critical to our growth and profitability is critical."

Initiative No. 2: Grow Partners

Another area Dell said Thursday that it was interested in is focusing on is its 138,000 member-strong PartnerDirect program. "We will be investing in sales coverage and expanding our growing channel partnerships with our PartnerDirect program," Gladden said. He said the Global PartnerDirect program was key to expanding Dell's presence in "growing and emerging markets."

Earlier this year, Matt Baker, executive director of enterprise strategy at Dell, attributed the company's server share growth, in part, to an expansion in the number of Dell partners in the company's PartnerDirect program -- up 38 percent in the last year.

NEXT: More Acquisitions On The Way

Initiative No. 3: R&D And Acquisitions

Dell CFO Gladden also said the company would grow its enterprise and solutions business via continued investments, research and development, and additional acquisitions.

"We continue to make large investments in R&D and sales capacity around the enterprise solutions and business services," Gladden said. He said past investments have helped Dell accelerate its growth in key markets such as cloud and business services.

According to Bloomberg, Dell is ready to crack open its wallet to acquire companies in the $500 million to $1 billion range.

But, there is some question as to whether Dell can heavily invest in research and development and acquisitions as a private company that no is longer able to raise capital from the public markets. Gladden tamped down those concerns Thursday and said Dell is anticipating generating strong cash flow for investments and can turn to minority investor Silver Lake should the need arise.

In fact, Dell counted its privatization as a plus for its ability to make additional investments. "We will have the flexibility to accelerate our strategy and pursue organic and inorganic investments without the scrutiny of quarterly targets and other limitations as a public company," Gladden said.

Since 2006, 451 Group's Daly wrote, Dell has averaged five acquisitions a year. "It's also relevant to note for the soon-to-be-private Dell that shareholders footed the bill for that shopping spree," he wrote.

Initiative No. 4: End-To-End Business Solutions Provider

"Dell's expansion as an enterprise and solutions provider is critical to our future success," Gladden said.

For its part, Dell's ability to leverage the 20-plus acquisitions it's made since 2009 into its enterprise services has seen little success. Returns on the nearly $13 billion spent on acquisitions has been lackluster, experts say. Gladden Thursday, however, countered that Dell was still "digesting" those companies.

"We've done a pretty broad reset of the Dell strategy over the past four years. We've acquired significant assets and built new platforms and end-to-end solutions. We've built what is a $21 billion business that's related to enterprise solutions and software business. The important pieces of the puzzle are in place; now it's about execution," Gladden said.

Dell is counting on growth in IT spending as a key to push into enterprise markets. "Exposure to the data center, exposure to the key drivers in spending today in IT, such as like virtualization, I think, give us a chance to get more than our fair share of a $3 trillion opportunity," Gladden said.

But, Dell's challenges, Pund-IT's King said, are just beginning.

PUBLISHED SEPT. 13, 2013