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Dell Reinvents Itself to Survive a Post-PC Universe

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Once a leader in computer systems, Dell (Nasdaq: DELL  ) is quietly rebranding itself for a post-PC world. A string of recent acquisitions marks its attempted transformation from a consumer-device company into a business focused on enterprise. If successful, the tech giant's corporate overhaul could mean generous returns for patient investors. However, the real question is whether Dell's fresh direction can power up revenue growth and help the company capture new business.

Investing in the future
According to The New York Times, Dell dished out a reported $1.25 billion last month to buy SonicWall, a provider of Internet security solutions for corporate networks. This was a major turning point for Dell. The move puts the company in direct competition with Cisco Systems (Nasdaq: CSCO  ) , Juniper Networks, and Hewlett-Packard (NYSE: HPQ  ) for control of the IT products and services industry.

Dell's more recent purchase of Wyse Technology, a thin-client maker and provider of cloud-management software, offers further evidence that Dell plans to create its own cohesive enterprise suite to compete with Cisco and HP's unified server systems. Wyse currently leads in thin-client market share, with HP in the No. 2 spot. However, both Cisco and HP can expect increased competition from Dell, thanks to smart acquisitions such as these. Wyse's desktop virtualization technology and thin-client capabilities bolster Dell's position in the IT market by extending its portfolio of products and services.

With a 15% CAGR, market analyst IDC expects the thin-client market to be valued around $3 billion by 2015 -- meaning Dell's playing in the right space in terms of growth potential. In addition, the Wyse acquisition better positions Dell to grab a piece of the fast-growing cloud-computing market, which should also help the company earn new enterprise customers.

New directions
Dell's been struggling to keep up lately, and this could be the change it needs. For those at home keeping score: The addition of Wyse brings Dell's acquisition spree to 14 businesses purchased in the past two years. Dell now faces the tougher challenge of smoothly integrating these acquisitions into a unified suite of product offerings.

With traditional desktops being replaced by mobile devices and tablet computers, Dell understands the need to beef up revenue channels outside its PC business. Acquisition costs will weigh on profits in the near term, but Dell's moving in the right direction. I think investors would be wise to keep an eye on this stock as it continues to invest in the future of IT. Track the stock for free using The Motley Fool's My Watchlist tool.

Fool contributor Tamara Rutter owns no shares of any companies mentioned in this column. Motley Fool newsletter services have recommended writing covered calls on Dell. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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