In a world that is largely governed by human needs and wants, the people who have taken up the job of providing for those needs can find that human needs are fickle and can change at any given moment. The change might be abrupt or long drawn out but it does happen. The biggest proof of this trend can be seen in the market forecast drawn up by the Directors of DELL regarding the future of the PC.
A largely popular commodity once, the demand for the PC is responsible for the establishment of organizations like HP, DELL, Apple and various other PC-based organizations. Therefore, it comes as a rather shocking surprise to find that long established PC Mongols might have to re-evaluate their business, owing to the fact that there is less and less demand for PCs each year. The news came out when DELL moved to file a special statement with the U.S Securities and Exchange Commission which detailed DELL’s predictions about the industry and the future plans for DELL.
Over the years, the need for the PC has largely gone down and DELL is struggling to come up with a solution. The submitted proxy statement stated plans for taking the company private to save their shareholders from having to share in the ‘Various risks and uncertainties related to continued ownership of Common Stock.’ Speculation is being made about how the move to go private will affect DELL. With PC sales already declining and being responsible for generating almost half of all DELL’s revenue, the low margins point towards the fact that the declining PC business is no longer sufficient to sustain or encourage growth for the organization.
However, it is believed that DELL may still remain involved in the client computing business. The directors of DELL posted a few reasons for the declining slump in their PC sales which has been brought about because of:
- Continued pressure at a microeconomic level.
- Lengthening cycles of replacement.
- Increasing use of substitutes, such as the use of tablets or smart phones.
Moreover, even if these problems were rectified, the competition that DELL faces, particularly from companies like ASUS and Lenovo is still causing the company to face further losses. This is due to the fact that DELL is known for catering to ‘higher-margin premium PC products.’ Companies like Lenovo and ASUS are more skilled at concentrating on the demands of the lower end of the market, churning out machines that are more budget friendly while still providing customers with the services they require.
Faced with such competition, DELL has thrown up its hands, since there is significant data that suggests the possibility of a ‘shift in demand to lower margin value products, a segment in which the company has been historically much less competitive.’ The move to privatize DELL, as well as the release of this proxy statement by the DELL Directors, can be seen as Michael Dell trying to steer the company out of the fiercely competitive PC market by trying to cut their losses before things take a much bleaker turn.