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Dell's SEC report describes challenges for PC makers

John P. Mello Jr. | April 1, 2013
Dell described a bleak outlook for the PC industry on Good Friday in a document filed with the U.S. Securities and Exchange Commission.

Dell described a bleak outlook for the PC industry on Good Friday in a document filed with the U.S. Securities and Exchange Commission.

The document, one of several filed by the company in connection with its move to go private, includes a laundry list of ills that pretty much defines life for computer makers in the post PC era.

That list identifies factors contributing not only to Dell's present and future performance, but paints a picture of the uncertain world ahead for all PC makers.

Dell's pitch

In its filing, Dell makes it sound like it would do present stockholders a favor by buying out their stock and taking the company off the stock market. By scooping up all Dell common shares in the market, it noted, stockholders will "no longer be exposed to the various risks and uncertainties related to continued ownership of Common Stock."

Among those uncertainties are decreasing revenues from Dell's bread and butter products--desktop and laptop PCs. The company acknowledges it has no no idea when or if this trend will end.

Factors cited by Dell as contributing to present revenue declines include "uncertain adoption" of Windows 8, slowdowns of Windows 7 upgrades in the enterprise, longer PC replacement cycles, and, of course, substitution of tablets and smartphones for PCs.

Not only are Windows sales lagging, but Dell reported that alternative operating systems are gaining traction in the market, a trend hurting the company's PC offerings, which primarily run Windows.

Making matters worse, when someone finally upgrades a PC, the margins for the company on that sale won't be very high due to commoditization of pricing for PCs.

Those revenue declines might be offset by sales of smartphones and tablets but, alas, the company confesses it has "very little presence" in those markets.

In the past, Dell has been able to rake in revenues from high-margin PC products, but that market, like the rest of the PC market, is in decline. Dollars for PCs are moving to lower-margin products, Dell noted, "a segment in which the company has historically been much less competitive."

Dell is also being hurt by the "Bring Your Own Device" trend in the workplace, it said, because that trend favors products produced by the company's competitors which "have greater appeal to consumers than [Dell's] current products."

Dell's founder and CEO Michael Dell announced he wanted to take the company private in February and put a $2 billion deal on the table to do it. However, he left the door open for Dell's board of directors to receive offers from other interested parties. Earlier this week, those offers came in.

 

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