Dell has offered a warning that the slowdown of the PC market could lead to possible challenges regarding its status as an industry leader.
In the company’s form 10-K, a documented designed to list any and all possible struggles a company might face, Dell voiced concerns over changes to favourable pricing, adverse global economic conditions, the company’s growth strategy, and challenges in transformation to an essential infrastructure solutions provider.
Much of this is something that would affect many other big business but the challenges in transformation to an essential infrastructure solutions provider is something much more specific to Dell itself.
In its form 10-K Dell said: “Dell Technologies expects its strategic transformation to an essential infrastructure solutions provider to take more time and investment, and the investments it must make are likely to result in lower gross margins and raise its operating expenses and capital expenditures.”
Dell says that in 2017 its Client Solutions business generated 60% of the company’s net revenue, most of which came from PC sales. However the company also said that PC sales declined worldwide by 5.7% during the year of 2016, and further decline is possible.
The 10-K goes on to say that Client Solutions is an integral part of their business but that intensifying market competition could lead to an increasingly challenging environment in Client Solutions. The lengthening of the life cycle of laptops and PC products, and the desire for mobile alternatives is also having an adverse effect on this.
Another factor that Dell has considered is the decline in margins as the demand for PC products has shifted to higher margin premium products, to low cost products, particularly in emerging markets and from low cost manufacturers.
Historically Dell has used the build-to-order model but the company admits that this has recently been losing competitiveness, and the previously stated demand for lower cost models has seen the market shift towards build-to-stock models.
The company also admitted that it currently offers a lack of strong tablet offerings.
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