Published: December 15, 2008 -- ROUND ROCK, Tex. -- Michael S. Dell has grown tired of discussing his company's reinvention.
"It's O.K. if everyone doesn't understand what we're doing," Mr. Dell said in an interview at the headquarters of Dell, the computer maker.
He mocks suggestions that the company he founded takes more risks than in the past. With a grimace and a curt comment - "I don't appreciate the tone of your reference" - he parries questions about how Dell's culture has changed.
Mr. Dell's weariness toward questions about what has gone wrong at the company, once the world's largest PC vendor, is understandable. He was famous for gloating about Dell's consistency and relentless growth, but its heralded direct-sales business model and cost-squeezing supply chain management no longer give Dell the advantages they once did. Mr. Dell has further cut costs and experimented with retail sales.
The company, based in this small town just north of Austin, needs to do more. It plans a run of acquisitions to restore growth. But it finds itself playing catch-up in one of the most difficult economic times in its history. Its strategy hinges just as much on big bets as precise execution.
"It appears they are boxed in on all sides," said Ashok Kumar, a securities analyst with Collins Stewart. "I don't know how they can possibly extricate themselves from the hole they are in."
Analysts fear that after all of Dell's revamping, the company will end up right where it is -- largely dependent on the whims of businesses that buy PCs. In that case, Dell's second act would look very much like its first, with the company remaining a distributor. Except this time, it will be fighting in a world that has moved on to favor well-rounded, more flexible rivals.
Fellow tech giants like Hewlett-Packard, EMC, Cisco Systems and Oracle have spent the last several years bulking up through a steady stream of acquisitions. H.P., for example, has increased its annual revenue to a projected $130 billion for the coming year, from $45 billion in 2001.
Oracle has doubled its annual revenue over a similar period to more than $22 billion. EMC traced 76 percent of its revenue to hardware in 2000, but it now derives 57 percent from software and services thanks to acquisitions.
These companies, along with Sun Microsystems and I.B.M., have scooped up many of the prized assets that either survived or thrived in the era after the dot-com bust, fattening their software and services arsenals.
Dell's growth, to revenue of $56 billion in 2006 from $5.3 billion in 1996, has come from within. But company executives now concede that they need to make a large acquisition, or a series of them, to tap the repeating, higher-margin revenue streams that come from the software and services businesses.
But the company trails the major technology companies. Dell has $9 billion in cash, but a deflated share price, its unique culture and inexperience with absorbing a major acquisition raise serious questions about just how much change and breadth Dell can buy.
"It's not a question of size," said Brian T. Gladden, chief financial officer at Dell. "I think the question is more around diversifying our revenue base and becoming bigger in some things that are attractive for the long term."
Dell executives point to any number of acquisition possibilities: servers and storage systems, software and services. "That is where we have to do an acquisition to become relevant," Mr. Gladden said. "There is no question."