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HP casts doubt on Dell deal to spook customers

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Tue Feb 05 2013, 17:52
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CONFUSED PC MAKER HP has moved quickly to cast fear, uncertainty and doubt on Dell's $24.4bn leveraged buyout to try to spook Dell customers concerned about the deal and tempt them to buy from it instead.

The move had been on the cards for a few weeks but was confirmed on Tuesday, with founder Michael Dell arranging to buy back his own firm and Microsoft putting up a $2bn loan.

The deal should help buy Dell time in the PC market by removing shareholder pressure and giving it breathing room to evolve its business into enterprise services.

However, HP has sought to capitalise on customer anxiety about the move, attempting to lure them to its products and services as it too faces a steep climb to return to the top of the PC market.

"Dell has a very tough road ahead. The company faces an extended period of uncertainty and transition that will not be good for its customers. And with a significant debt load, Dell's ability to invest in new products and services will be extremely limited," HP said.

"Leveraged buyouts tend to leave existing customers and innovation at the curb. We believe Dell's customers will now be eager to explore alternatives, and HP plans to take full advantage of that opportunity."

Carter Lusher, chief IT analyst at Ovum said that while Dell's move makes sense in the long run, HP's scaremongering could work as Dell's corporate changes will not be straightforward.

"While the company might come out of this transition stronger with a product lineup that better meets the needs of businesses and public sector organisations, there will be uncertainty as to what products and services stay, get strengthened, or get eliminated," he said.

"Ovum sees effective communication to prospects and customers about its strategy and product roadmap as a, if not the, critical success factor to get through the transition. While this might sound simple it is not." µ


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