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Dell's Wyse buy a hedge against slowing PC sales

Agam Shah | April 3, 2012
Dell's plan to buy Wyse Technology is an effort to boost its client hardware portfolio and protect the company from the effects of the recent slowdown in PC sales, analysts said on Monday.

The PC slowdown comes as customers transition from PC infrastructures to virtualized and cloud-based environments, said Krista Macomber, an analyst at TBR, in a research note. Wyse provides products that efficiently link endpoints with servers, storage and networking.

"The infrastructure demands of virtualization allow Dell to now focus on areas of IT such as servers and storage that are growing more rapidly than PCs," Macomber said.

While Wyse's hardware products are inexpensive, companies end up spending more on infrastructure tools to keep the virtual desktop up to speed, analysts said. That could prove to be a more profitable proposition for Dell than PCs.

Dell is also building its client computing portfolio to catch up with competitors like Hewlett-Packard, which already offers a range of PC and thin-client options, said Mark Margevicius, vice president and research director for client computing at Gartner.

Dell has been building its virtual desktop product portfolio internally, but with a very PC-centric approach to the market, Margevicius said.

"The results were lackluster, and for the most part not attractive to customers," Margevicius said, adding that Wyse provides the instant expertise and a large distribution channel for Dell's existing virtual desktop products. Wyse holds more than 180 patents and has 3,000 resellers in the channel.

As a smaller vendor, Wyse has also struggled to compete with HP on larger deals, Margevicius said. Dell could provide Wyse some heft and credibility to compete on sales to customers that would otherwise be hesitant to deal with a niche vendor.

Dell did not disclose what it's paying for Wyse, but financial analyst firm Sterne Agee estimated that it may be between US$400 million to $600 million. The transaction is expected to close in the next fiscal quarter, which will be reported on Aug. 21.

 

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