Can Dell diversify itself in light of slowing PC sales?

Faced with dwindling PC sales and host of other issues, Dell is planning to diversify itself into services and products including servers, network switches, storage gear, and software.  Its PC and notebook sales dropped more than eight percent during the last fiscal year ended January 31, according to Bloomberg Businessweek.  In 1990s, Dell made a name for itself by introducing built-to-order PC business.

Dell is the number two basic server producer behind Hewlett-Packard and claim just over 20 percent of the market share.  The problem with the server business is larger users such as Google and Amazon.com dictate terms and Dell and others in the server business do not have much pricing power.

Dell’s attempts to get into enterprise solutions that include storage gear, software and network switches have other problems too.  Most of these sectors are already crowded and dominated by Cisco, Oracle, IBM, NetApp and others.  Dell earns less than four percent of its revenue from these mediums and the business is growing very slowly.

Another problem that Dell is facing at this time is its pending proposal to go private.  This will limit its ability to expand mergers and acquisitions as it did in the past.