Dell has had a long partnership with Devon IT,the Dell OptiPlex FX 130 and FX 170 thin clients and the Dell FX100 Zero Client are OEM editions of the Devon IT TC2, TC5, and TC10. Dell also OEMs Devon IT’s VDI Blaster software thin-client and its Echo Management Console software. All of which are considered to be high quality products. So if Dell already has access to its own thin client products and management software why did it need a thin client vendor of its own, and why didn’t it pick Devon IT instead of Wyse.
This is best seen as a straightforward recognition by Dell of a growing markets followed by a decision to fast-track a grab for increased market share by acquisition of the current market leader in preference to organic growth from within its existing organization. Wyse is currently ranked as number one thin client vendor on sales volume in Q4 2011 according to IDC, and saw sales growth of 45% in 2011. The Wyse acquisition provides Dell with 150 software engineers and over 180 patents, as well as 3000 customers and an annual revenue of approximately $375 million. Wyse also brings Dell significantly higher margins than Dell is used to in its PC business. In a glowing market it makes sense for Dell to own its own thin client products where it can reap the full benefits of sales, where an OEM relationship may server to fill out a product line but does so at a lower margin. Dell could have achieved this by buying Devon IT but although it may make good products, its acquisition would not move Dell into the market leading position that it clearly wants to own.
Dell also sees the acquisition as a way to benefit from Wyse’s existing customers. Jeff Clark (Dell – Vice Chairman, Global Operations and End User Computing Solutions)some it up by saying
For every thin client hardware dollar that exists in our industry, there’s $5 of enterprise servers, storage, networking services that go along with that. So, our ability to really move into that $18 billion marketplace with an end to end set of solutions from Dell is certainly how we view the asset a key piece.
IDC estimates that the worldwide thin client demand will grow by 15% per year to $3 billion by 2015 and that the end to end infrastructure stack (i.e., servers, storage, software, and services) is expected to exceed $15 billion by 2015 (contrast with Gartner’s forcast of $65 billion by 2013)
Another factor is the action that Wyse has taken recently to diverse by away from being a pure thin client company. Although thin client hardware is still the core business, wise has been increasingly involved in cloud software services, acquiring cloud-based mobile device management vendor Trellia last November (now Wyse Stratus) and launching PocketCloud Explore in late December.
Dell has not released information about its plans for its current Devon IT source to thin client hardware, but it is reasonable to assume that this hardware will be quickly phased out. Devon IT has not responded to a request for comment.