The Fool's Seth Jayson recently homed in on the key challenge facing Dell (Nasdaq: DELL): keeping "cash flow on the grow." Restless investors, seeing the challenge Dell faces, have sent the stock plunging so far over the past year that it's lost a third of its value.
The company is desperately trying to get its mojo back. And one of its latest strategies is to get cozy with supergrowth company Google (Nasdaq: GOOG). The search king will use Dell's new PowerEdge servers for its corporate search appliance, which allows companies to delve into their enormous amounts of data using a simple Google search box. In other words, it's intranet search instead of Internet search.
What's more, Google's trend of server-heavy uses for the Internet is catching on. Social networking sites, like News Corp.'s (NYSE: NWS) MySpace.com, are attracting huge numbers of visitors and demand lots of servers. So do video sites, such as YouTube.com. Corporate America is even in on the game, moving its vast amounts of data to the Net. For example, Salesforce.com provides its customer relationship management software as a Web-based application. And again, that means having lots of servers.
Dell's new line of PowerEdge servers is based on Intel's (Nasdaq: INTC) new dual core chips, the Xeon 5000 and 5100. Besides increasing performance by more than 150% over previous chips, the chips use about one-fourth less power. This is incredibly important in the server market, especially when you calculate the benefits out over the power requirements of a million servers.
Serving it up
The explosive growth of data on the Net means plenty of room for growth for server companies. And by teaming up with Google, Dell will enhance its credibility in the market as well as get a good amount of buzz.
Yet Dell must still deal with fierce competition from megaplayers such as Hewlett-Packard (NYSE: HPQ) and IBM (NYSE: IBM). There are also a variety of venture-backed startups to contend with, like Fabric7, which is backed by investors Goldman Sachs, Sanmina-SCI, and AMD (NYSE: AMD). Still, as Fabric7 founder and CEO Sharad Mehrotra recently told me, "The data explosion is an opportunity for everyone."
So at least Dell has a goal to focus on -- and a plausible chance to recapture its growth-stock status. Now it's a matter of building strong products and aggressively capturing market share. Certainly, the deal with Google is a great start.
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Fool contributor Tom Taulli does not own shares of companies mentioned in this article.
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