Oracle Pens Deal with Dell

Zacks

Dell Inc. (DELL) has entered into a strategic alliance with Oracle Corporation (ORCL). The two are teaming up to introduce a new x86 infrastructure, which will help customers of both companies.

 The solution will combine Oracle’s software with Dell’s hardware, which will enable organizations to manage applications faster and also to improve the performance, flexibility and efficiency of the system. 

Through this partnership with Oracle, Dell is trying to simplify its IT infrastructure and reduce the integration costs of delivering its hardware and software as a bundle. Offering a combination of Dell and Oracle x86 infrastructure support functions will provide a single point of contact for customers.

Although Dell is making an attempt to work its way up by going into collaborations and securing deals, the company is faced with the same PC market concerns that have struck its peers. Dell’s over-dependence on the segment (still around 70% of revenue) has been a matter of concern for long and is likely one of the reasons it was driven to go private.

Senior management of the company is of the opinion that Dell is facing its biggest challenge in the Consumer and Notebook segments. Revenues from the Consumer Business declined by 20.0% in the first quarter of 2014, which is a substantial fall compared with the other segments.

The company has to adopt innovative strategies, and explore other businesses to reduce its over-dependence on PCs. The collaboration with Oracle is one of the strategies that the company is adopting.

In spite of all the strategies, the headwinds faced by the company make us apprehensive about its future. In the past year, the company has had its share of challenges in the form of tough competition from Hewlett-Packard (HPQ) and Apple Inc. (AAPL), as well as a restricted spending environment which hurt revenues.

However, we expect new deal wins and privatization to help the company.

Dell Inc. has a Zacks Rank #5 (Strong Sell).

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