To that effect, the company on Wednesday introduced new PowerEdge servers, which will use Intel’s next-generation Xeon processors, designed to increase system speed and performance per watt of power consumed. The servers will also put system management and diagnostic capabilities into embedded chips. Servers usually ship with installation software on CDs, but the software will now go on the chip instead.
Dell is the second-largest low-end and midrange server vendor worldwide, behind HP, according to IDC. The new servers could help Dell gain market share if it can beat both IBM and HP on price, King said. IT budgets are flattening due to the recession, and Dell can deliver value to customers with the price advantage it already has, he said.
"A mixture of price and performance shows they know how to skin six cents out of a nickel on the manufacturing side, but they have developed a more valuable view of the enterprise than ever before," King said.
The offerings play into Dell's traditional strength in direct sales, which has led to direct relationships with large customers. That is an advantage that could help it compete with Cisco in the integrated server platform space, analysts said.
"Dell can bundle all these items -- new servers, new management tools -- with its storage systems and services, and top it off with software and any other items customers need, and wrap it up with a bow. This is what Dell very much wants to do," Spooner said.
Dell has consistently reorganized its product lines in an effort to gain a larger server market share since Michael Dell rejoined the company as CEO in early 2007. The company reshaped its server business and acquired companies such as EqualLogic and MessageOne to boost its storage and services offerings. However, Dell's server revenue unit shipments declined 18 percent during the fourth quarter of 2009, with server revenue down 16 percent year-over-year during the quarter.