A Cloud-Computing Gem in the Making
May 4th 2012 9:35AM
Updated May 4th 2012 9:36AM
Dell (NAS: DELL) seems to be making all the right moves. The company is not only focusing on the exploding market for tablet computers in the corporate sector, but is also further heading out into the cloud-computing space, which is another high-growth industry.
New niche acquisitions
Dell recently acquired desktop virtualization specialist Wyse Technology for about $1 billion. Wyse makes devices known as "thin clients" that act as virtual desktops networked to cloud servers. Dell can now offer the benefit of having a virtualized desktop environment to its clients, thus enabling them to reduce costs as only a central server needs to be maintained in such a setup.
But that's not all. Dell also is expanding its presence in the cloud-computing realm with two newly planned acquisitions: Clerity and Make Technologies. Dell plans to merge the two acquired companies into its currently operational Dell Services, with the aim of helping to migrate a client's traditional mainframe applications into newer, cost-effective, cloud-based systems.
Change in strategy
Dell seems to have made a timely move with these acquisitions, as businesses are displaying an increasing trend of shifting away from individual computing devices to central cloud-based systems. According to research firm International Data Corp., spending on cloud computing is slated to touch a whopping $72.9 billion by 2015. Not to mention that the "thin client" segment should be worth at least $3 billion by that period.
At the same time, Dell is making it quite clear that it intends to reduce its dependence upon its bread-and-butter personal computing business. This may be necessary given that Dell shipped 4 million units in the United States during the fourth quarter of last year, down from 4.2 million it shipped for the same period in 2010. My guess is that Dell is taking a cue from HP's (NYS: HPQ) alarming loss of market share last year, although HP is trying to restrategize by combining its PC and printing divisions.
Others in the cloud
But the cloud-computing space doesn't exactly represent a clear blue sky. Amazon (NAS: AMZN) is one important rival to watch out for. The company offers IT infrastructure and cloud-computing services to a wide variety of clients through its Amazon Web Services. Others, such as Cisco, EMC, and VMware, are also big players in the cloud-computing space.
Moving in the right direction
Dell's recent spate of acquisitions makes it amply clear that the company is set to reap the benefits of the cloud-computing world, as cloud-based services are increasingly doing away with the need for chunky storage devices. The results are likely to speak for themselves in the near future.
Dell sure looks like a good long-term bet in the realm of cloud computing. But if you desire more, you can check out this free report brought to you by some of the best minds at Motley Fool that will help you retire rich by investing in three stocks. I invite you to take a look at this special free report, which will be available only for a limited time. Hurry up and click here before its gone!
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At the time this article was published Keki Fatakia does not hold shares in any of the companies mentioned in this article.The Motley Fool owns shares of Amazon.com, Cisco Systems, and EMC. Motley Fool newsletter services have recommended buying shares of VMware and Amazon.com. Motley Fool newsletter services have recommended writing covered calls on Dell. The Motley Fool has a disclosure policy.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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