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Summary:

The fact that perennial PC power Dell is buying Wyse Technologies for its thin client and desktop virtualization smarts shows just how much the power equation has shifted from low-margin PCs to cloud computing and other services in recent years.

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Dell’s decision to buy Wyse Technologies for its thin client and desktop virtualization smarts shows how much the power equation has shifted from PCs to cloud computing and other services in recent years.

It also illustrates that John Swainson, the former IBM and CA executive who joined Dell as president of a new software group in February, is serious about building up the company’s cloud, services and software portfolios. When he took the job in February, Swainson said his goal “is to make software a meaningful part of Dell’s overall portfolio …. This is not the last thing you’re going to see from us.”

Wyse is just the latest acquisition Dell is using to expand beyond its PC roots (and the low-margin PC business). Last month, it purchased network and data security company Sonicwall, as well as backup, replication and recovery software specialist AppAssure.

The idea of a PC maker buying desktop virtualization technology which, in theory, makes it easier for companies to buy fewer PCs, seems counterintuitive until you realize that the PC business is not the place to be anymore. Just ask HP, which last year considered offloading its huge but margin-strapped PC unit.

“Until recently, you wouldn’t think a PC vendor would go after a desktop virtualization vendor. This just shows that the cloud value is more important than the device value,” explained IT consultant Dana Gardner, founder of consultancy Interarbor Solutions. San Jose, Calif.-based Wyse, founded in 1981,  fields a portfolio of thin clients and other software  and management technology that ties into desktop virtualization.

For PC makers, diversification is the name of the game

Increasingly, hardware companies like Dell and rival HP are trying to monetize all the non-PC gear on the back end of cloud services. “As margins for those end devices fall, these companies have to make money on the infrastructure that supports the delivery of services,” Gardner said.

To borrow the catchphrase used by all these hardware companies trying to remake themselves for cloud services, their new goal is to provide “end-to-end IT solutions.” In its statement announcing the deal, Dell said the addition of Wyse “will expand Dell’s desktop virtualization capabilities and provide new solutions and services opportunities for the full range of Dell’s enterprise offerings.”

Of course, Dell’s push beyond PCs actually goes back several years. In 2007, Dell bought EqualLogic for it’s iSCSI SAN storage expertise — and to lessen its reliance on storage partner EMC. Dell subsequently added Compellent to its storage arsenal in 2010 after being outbid by HP for 3Par. But as HP’s busy M&A activity highlights, Dell is not alone in this land grab to establish position in the data center and data-center-supplied services.

Terms of the Wyse purchase, announced Monday morning were not disclosed, although it is expected to close in Dell’s second quarter.

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  1. Uhg. When they bought Sonicwall, CDW and such dropped their whole line. What are they going to do without Wyse terminals??

    1. @davidcdean yes, the whole CDW-Dell scenario should get even more interesting going forward.

  2. danalgardner Monday, April 2, 2012

    Reblogged this on BriefingsDirect.

  3. I’m weary of the transformation of these traditional PC and Server vendors to enterprise players. IBM was able to make this shift because they have roots in the Enterprise from managing their own operations. Having 100K+ employees helps build a ton of knowledge.

    Dell and HP are in much different situations. I don’t know if they have the chops to expand beyond their core PC and Server business. HP’s plunge into services with EDS has it’s challenges as the Federal side of the business shrinks. I’m still questioning their purchase of Compaq.

    Dell isn’t going after services as heavily but I don’t know if they have the talent to cross sell all their services without damaging their relationships with their existing partners.

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