Dell to Partner with Microsoft - Analyst Blog

The third-largest PC maker in the world Dell Inc. (DELL) recently announced that it will partner with another tech giant Microsoft Corp. (MSFT).

The strategic partnership, which was announced at Microsoft’s Worldwide Partner Conference, will allow Dell to use Windows Azure platform appliance to enhance its cloud services.

The new Windows Azure platform appliance combines Windows Azure and Microsoft SQL Azure with Microsoft-specified hardware, enabling on-demand IT capacity and faster delivery of new applications. By deploying the application in their data centers, large enterprises and service provider partners will benefit from the cloud services provided by Microsoft.

Apart from benefiting from Microsoft’s application, Dell will help develop the Window Azure Platform appliance with its rich infrastructure.

Moreover, Dell will enhance its platform-as-a-service (PaaS) application with Windows Azure platform appliance and facilitate its customers with an expanded suite of cloud-based services.

Cloud computing makes businesses more green and cost efficient since running of software applications becomes easier through the Internet, rather than running them on PCs. According to IDC, the cloud will drive 19% of additional growth in software spending by 2013–2014. Additionally, IDC forecasts cloud spending to grow five times faster than all applications spending, representing a CAGR of 26%.

Dell has been a top provider of cloud computing infrastructure to the leading global cloud service providers. We believe that Dell is well positioned to capitalize on the forecasts made by IDC. Moreover, the partnership with Microsoft will allow Dell an added advantage over its cloud competitors.

Dell reported strong first quarter revenue with an encouraging 21% growth over the prior-year quarter, driven by strength across all its business segments. Dell expects fiscal 2011 revenue to increase 14.0% to 19.0% from the prior year, helped by the increase in consumer and corporate spending.

However, Dell’s relative weakness in emerging markets remains and its high debt level is also a concern. Moreover, stiff competition from technology majors, such as Hewlett-Packard Co. (HPQ), Apple Inc. (AAPL) and International Business Machines Corp. (IBM) is always a factor to consider while investing in Dell.