Wall Street analysts speculate that Dell was gearing up to make the largest acquisition in company history. Dell spent close to $7 billion on share repurchases over the last year, while Mr. Dell has also spent his own money buying close to $200 million in Dell stock. With these gestures of confidence, Dell's share price rose to more than $25 in late August from an eight-year low of $18.24 in April.
But Dell, like many of its peers in the tech industry, has been rocked by the overall slump in the stock market, and its shares closed last week at $11.48, a level investors have not seen since 1997. The shares closed at $11.13 on Monday.
Dell has also made relatively few acquisitions. The largest buy in its history was the November 2007 deal for the storage start-up company EqualLogic. Dell shelled out $1.4 billion for the company in a bid to outpace rivals in the market for an emerging type of storage technology called iSCSI.
This technology works well with the latest hot technology in corporate data centers, virtualization software, which is used to run many applications on a single server. Dell paid a premium for moving early; H.P. bought a company with similar technology a few months later for just $360 million.
Dell also bought small services-focused companies like Everdream and SilverBack, using their software as the backbone of a revamped services business. Here again, H.P. outshone them. It bought Electronic Data Systems, one of the world’s largest data services companies, for $13.9 billion.
H.P. has turned the process of acquiring companies and then cutting costs out of the operations into a science, while Dell is just experimenting with it. In addition, Dell must now learn to exploit and embrace purchased intellectual property after spending most of its history relying on partners' software.
When asked about how critical a large purchase is for Dell’s long-term strategy, Mr. Dell would say only that the company has been making more buys than in the past.
"If you look at the first 22 years of the company's life, we made basically zero acquisitions," Mr. Dell said. "In the last two years, we made about nine acquisitions."
Mr. Dell deflects discussions toward Dell's internal growth, where consumer and some emerging markets sales grew by double-digits last quarter.
"We don't have a problem of not enough opportunity," Mr. Dell said.
Dell has responded to a changing market by investing heavily in design, and it offers some of the sleekest systems on the market. It also consults with companies in the cosmetics, medical and aerospace industries to create ever stranger products, including a proprietary bamboo sheath that wraps around a line of compact PCs.
While the consumer line drives the impression of Dell's brand with both consumers and businesses, company executives complain that far too much attention is paid to its consumer operations, which account for just 20 percent of Dell’s $60 billion in annual revenue.
Dell executives prefer to talk about opportunities in corporate hardware and services.
Dell has applied some of the same design focus seen on consumer laptops to its server business. The company now makes server and storage parts out of metal rather than plastic, saying that customers respond well to the feel of metal handles and the firm clicking sounds of a fan or hard disk sliding into place.
"You can make a cheaper product, but we're trying to make a better product," said Ken Musgrave, Dell's director of industrial design.
Dell has also created a start-up within the company that makes custom hardware for large data centers run by Microsoft and Amazon.com. In just over two years, the division has grown to the point where it would be the fifth-largest server maker in the world if it were an independent company. As a result, Dell now sits at the heart of the next Internet build out.