Summary
Dell needs to move quickly if it is to keep its numbers up as PCs continue to commoditize. Dell needs a new consumer play and there isn't time to sit around architecting one. Dell needs Palm.
Analysis
Dell is a great company. Smart people. Good products. Global infrastructure. Commoditizing markets. Thin margins.
Three choices: 1) Hunt for another EDS, or piece-meal acquisitions, and try to compete in the services space with HP and IBM. 2) Attack the small to medium business (SMB) market. 3) Expand their considerable presence in the consumer space.
So, let's look at the three choices:
Enterprise: If they want to spend a lot of money they could try for an Accenture or Computer Sciences Corp. or even CapGemini. For less money they could get a Keane. Where would that leave them?
Small/Medium: The SMB market had been hard for all of the big boys to crack. ATT, Verizon, HP, IBM...no one does it well. Can Dell?
Consumer: Dell has nailed the consumer market before. There are many options, but Dell has to get away from dependence on PC sales.
Almost everyone assumes Dell is going to do the first one and attack the enterprise space along with HP and IBM. Why do they assume this? Because the money is in services, solutions and recurring contracts. But, the risks to Dell are staggering. Dell is not an enterprise service company. It will have a hard time changing that perception and its management are, well, the wrong folks for entering the enterprise market.
Dell has already showed its interest in the SMB market. With the announcement of the expansion of their ProManage managed services and an agreement with ATT, Dell just might be able to pull this one off where others have failed.
What is Dell really good at? Packaging. Consumer products.
Will Dell abandon its roots and enter a highly competitive IT enterprise services market with everyone fighting tooth and nail? Will Dell risk its future on the small/medium business market where almost everyone has already failed?
Dell is a great product company. They need to use that greatness to their advantage. Leading consumer electronics companies are having hard times right now. Look at Motorola. Probably too expensive, but a possible merger? Look at Palm. Having some problems, but really good foundational technologies.
Palm could give Dell the fast entry it needs. With Dell's international network of assemblers Dell could slash production costs and help work the kinks out of Palm. Palm would give Dell the technologies it needs to come to market first with many new consumer offerings.
HP's iPaq is a non-competitor. Motorola is missing the boat. RIM hasn't figured out what cool device looks like. The Sony Satio and other devices are still two quarters away.
A match made in heaven. But, Dell better move fast.
