Microsoft Corp (MSFT)

[Emerging Growth]

Good Story on Dell...

http://emerginggrowth.com/featured_stories/dell-nasdaq-dell-not-down-for-the-count/01/16/2013

It’s no secret that tablets and smartphones are replacing the laptop and desktop and PC giant (NYSE:DELL) is rapidly becoming a casualty of mobile processors and advanced connection speeds. The company has fallen into third place behind Lenovo (OTC: LNVGY) of China in the PC share market and it is questionable whether they can hold that position. The age of the personal computer is not just experiencing a decline; it is little by little coming to an end. Dell is being exceptionally hard hit as it doesn’t have a dog in the smartphone fight. Investors fear that as the PC era declines, Dell and competitors such as Hewlet-Packard (NYSE: HPQ) will gradually fade away.

The Company had a rough go of it this past year as revenues and profits continued to shrivel n the third quarter of fiscal year 2013. Dell did manage to collect revenues of $13.7 billion; it was still a considerable drop from Q2's $14.5 billion and the $15.5 billion it reported over the same period in 2011. Profits also dropped, with only $475 million of the money coming in adding to the bottom line. Q3 of 2012 saw Dell with $893 million in net income. That’s a whopping 47 percent drop.

Dell is laying part of the blame on Microsoft (NASDAQ: MSFT) citing its release of the new Windows 8 operating system and what they see as consumer hesitation to invest in new devices that operate on the software. The company, which uses the Windows system on its PCs, says that the new system will not help bottom line profitability until well into 2013. Conversely, Dell has announced that they support the new operating system. The company has redesigned its portfolio to accommodate Windows 8 adding devices that are specifically designed for the new platform. Dell has also come up with the new XPS 12 Windows 8 Convertible Ultrabook. Like the Surface, it is a cross between a tablet and a laptop. This gadget just may nudge Dell onto a viable playing field with the likes of Apple (NASDAQ: AAPL) and Microsoft.

Dell’s attitude towards Microsoft is understandable. With the Surface tablet the software leviathan has finally done what its PC partners have feared it would do for years; that is put itself in direct competition with them. Much of Dell’s future success hinges on the new Windows OS. It really is a dual edged sword for the beleaguered company.

Lately Dell has been looking to diversification in order to expand beyond its PC niche. In 2011 it bought Compellent Technologies, a data storage company. In July of 2012, Dell announced the acquisition of Quest Software for $2.4 billion. In March of 2012, the company purchased a data security service called SonicWall. The deal is worth an estimated $1.25 billion. The concern among investors is that these gains may not pay off for years, which begs the question; is it ever too late for a company to diversify? There are, however, analysts that advocate investors take another look at Dell. Their assertion is that some would be investors are overlooking the PC giant. As proof they cite that the company brought in $61 billion in revenue in 2011. They also point out that Dell generates less than five percent of its income from consumer PC sales. Services to businesses and the government generate much bigger revenues for the company. Dell’s recent acquisitions will aid these clients. The consumer PC may appear to be vanishing, but there is still a place for it in the workplace. Another plus is that the company paid its first quarterly dividend of 8 cents a share last quarter.

So don’t write Dell off. The company possesses the tools to adjust to the swiftly changing market. The price of the stock is at a good entry point, trading at $10.90. Dell is making an impressive effort at diversification in order to compensate for dismal PC sales.