The Blackstone Group L.P. (NYSE:BX) has been “slumming” in distressed brands of late, so its play at Dell was no surprise. Blackstone is currently raising money for troubled retailer J.C. Penney. Blackstone is taking SeaWorld — home of those lovable, yet dysfunctional Orcas — public with a planned IPO of up to $100 million. Some investors believe the Dell Inc. (NASDAQ:DELL) deal was a springboard for something else; a drop in Dell’s shares and a partnership with The Blackstone Group L.P. (NYSE:BX) would have facilitated making Dell a private company. The last ten deals closed by Blackstone have been with privately held companies.
The Blackstone Group L.P. (NYSE:BX) also wisely assessed that running a PC-maker in this climate was just too steep of a climb. The very fact that Blackstone would have tapped Mark Hurd, the former sex-crazed chief executive at Hewlett-Packard, to run Dell Inc. (NASDAQ:DELL) (had the buyout been successful) highlights Blackstone’s naiveté. Blackstone bailing on Dell shows that the company knows when to fold, walk away, and run. I guess that’s why it’s the largest alternative investment firm in the world — it knows its limits. The Blackstone Group L.P. (NYSE:BX) was one of the few in the financial industry that warned of the sub-prime mortgage crisis. In this case, Blackstone’s blinking was a good thing.
Play time is over
Why would anyone want to buy into a PC manufacturing and sales business now? Because there’s money in it. People still need PCs. Unprecedented declines in PC sales aside, who doesn’t use a PC these days? Who does “real” work on iOS or Android? Can you really trust an OS called “Ice Cream Sandwich” for anything but play? Why will the PC make a comeback? Because the PC market, even in a post-PC world, is huge. The PC market isn’t growing, but you can still grow in the PC market, with the right product mix.
The right product mix would take over market share from the current so-called competition. Most PC makers these days have one or two product lines. This current post-PC landscape is ripe for innovative products. Like circling vultures, there are scrappy companies and products ready to feast on the post-PC carcass. Contrary to reports, the PC is not dead. It won’t ever die. PCs are just too useful, too powerful. Mobile is for play, an accessory, a “nice to have.” PCs are work, often no play, dull like Jack. Those tied to the PC need to simply innovate. PCs can still dazzle, and there are PC makers who are creating dazzling products.
Razzle dazzle
Lenovo seems to be one of the few to believe in the potential of the PC. The Lenovo IdeaCenter Horizon is outstanding. The form and functionality of this machine could make it a game changer, and Lenovo the market leader. Considering the tablet starts at $1,600 and only goes up from there, depending on the specs, the biggest obstacle is clearly price. Price aside, applications will partly decide the fate of the IdeaCenter Horizon. The only true fault of the machine is that it’s Windows 8-powered. The key is Lenovo is trying — choosing to be an innovator, not simply waiting or wanting to be acquired. Lenovo’s acquisition of Stoneware was always about Lenovo’s PC business. Stoneware’s technology presented a meaningful opportunity to enhance Lenovo PCs, while adding real value for consumers. The very fact that Lenovo CEO, Yuanqing Yang, boasts of a “PC-plus era” shows Lenovo is truly the antithesis of Dell Inc. (NASDAQ:DELL).
Modular PC manufacturer Xi3 is taking another approach — making affordable and innovative compact PCs. The X7A is a prefect little product. It’s a gaming PC, maybe an office workstation, perhaps a node on a DIY 3D render farm. The possibilities are endless. In this case, Xi3 is thinking big by going small. Keep an eye on X7A and Lenovo’s IdeaCenter Horizon sales, as they could very well be a harbinger for the PC industry. Lenovo could be on the verge of dominating the PC space. All the company needs is one defining product to catch the imagination of consumers.
Dell dude
It’s a shame Dell Inc. (NASDAQ:DELL) has been focusing so much energy on being bought, rather than selling their Latitude 10 tablet PC. Its a good machine. This situation is yet another example of a PC maker not pushing its version of the future. Dell has been moving into the server and services market for over a decade. On the server side it’s becoming a market leader, and on the services side Dell has focused on Configuration Management (CM) and Master Data Management (MDM) pay-as-you-go solutions. This growth is good, but Dell Inc. (NASDAQ:DELL) needs the consumer market to add investor value. For Dell to thrive, the elephant in the room needs to be discussed. Michael Dell needs to groom a successor for his company — he is no longer essential for Dell to succeed. Dell not having a “Tim Cook” is a major liability. It has the potential to be like post-Chávez Venezuela — a clumsy power vacuum that can’t be good for investors.
PC-plus era
All Dell Inc. (NASDAQ:DELL) needs to do is look to BlackBerry to see its future. A public company’s CEO’s responsibility is to shareholders. Michael Dell needs to start innovating, or find someone who will. Surely, in a company with 14,000 employees, Dell has a deep bench. Does the company have someone with ideas? Dell has a chance to get on track, but, tick by tock, Dell is slipping away. With The Blackstone Group L.P. (NYSE:BX) backing out of the deal, investors will wonder whether Michael Dell Inc. (NASDAQ:DELL) will be able to keep Dell relevant. As Dell’s overall industry influence grows smaller, companies like Lenovo continue to think big. Lenovo’s PC business is growing — it’s passed Dell to become the second largest PC company by volume. Lenovo put itself into this position by acquiring competing PC makers, like International Business Machines Corp. (NYSE:IBM)‘s ThinkPad division, and adding great software as a service (SaaS) firms, like Stoneware, to bolster its PC line. Now, Lenovo, unlike Dell, is successfully staking a claim in a PC-plus era, instead of simply “looking for answers” in the post-PC market — you should do the same.
The article Forget Dell, Buy Lenovo originally appeared on Fool.com.
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