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DELL: RIDING THE WAVE WHILE MANAGING STRUCTURAL DECLINE

Strategic Assessment from June 2030

FROM: Executive Intelligence Unit DATE: June 2030 RE: Dell's Paradox: Thriving in Infrastructure, Declining in PCs

EXECUTIVE SUMMARY

Dell is positioned as the "picks and shovels" supplier for the AI boom. Infrastructure Solutions Group (servers, storage) is growing 34% YoY. But the PC business is declining 6-8% YoY. The company's overall growth is dependent on ISG growth continuing, which is uncertain if hyperscalers move to custom silicon.

THE CORE CHALLENGE

If ISG continues 20%+ growth: Dell is a growth company worth $300B+ market cap by 2035.

If ISG growth slows to 5-10%: Dell is a mature hardware company trading at 12-14x P/E and generating modest returns.

The question is not whether Dell is a good business—it is. The question is whether the company's ISG growth is sustainable or cyclical.

STRATEGIC DECISION POINTS

  1. What is our ISG growth rate assumption through 2035? Is 20%+ sustainable, or does it normalize to 8-12%?

  2. How do we defend against custom chips? If Google, Amazon, Meta move to custom silicon, we lose 30-40% of ISG revenue. Do we have a strategy?

  3. PC business: Is this a harvest business (maximize profitability) or do we try to revive it? Accept its decline or invest in new form factors?

  4. Vertical integration: Should we own more of the value chain (chip design, manufacturing) or stay in assembly/integration?

KEY STRATEGIC RECOMMENDATIONS

  1. Invest in custom silicon partnerships. Partner with customers on their custom chip designs. Become indispensable in their architecture.

  2. Expand storage and networking integration. ISG is servers. Storage and networking are higher margin. Deepen those businesses.

  3. Exit or restructure PC business. If it can't grow, harvest it for cash. Don't invest in reviving it.

  4. Prepare for margin compression. Server margins are under structural pressure. Plan for 14-15% gross margins, not 18%+.

THE CLOSING STRATEGIC ASSESSMENT

Dell is a good business in a strong market. The challenge is that the market is cyclical, and the company needs to prepare for normalization.

Clear strategy on custom chips, margin defense, and PC business transition is critical.

This strategic assessment is prepared for the Dell Board of Directors and C-suite executives in June 2030.