Dell’s stock took a dive this morning after it lowered its revenue estimates for the year, citing weak demand. While it’s server business remained strong, there’s no doubt that Michael Dell, the company’s CEO, is navigating a fine line.

On one side, Dell faces huge encroachments from Apple’s phones and tablets, which are cutting into Dell’s consumer PC and notebook business. On the other, it faces threats from Quanta and other wholesale manufacturers as efforts such as Facebook’s Open Compute threaten to reduce its importance in the server-making business for large webscale buyers and even cloud companies.

Dell’s losing streak on the consumer side.

Dell’s consumer business hit the skids this quarter and was down 3 percent from the previous quarter, although up from the previous year. However, at 19 percent of Dell’s revenue, the consumer business is an important one for Dell and one where it appears to be struggling.

Part of this is that consumer demand for laptops and desktops has been affected by Apple — not just because people are buying iPads, but also because there is a halo effect that leads consumers to purchase more Apple computers after they get stuck on the phones and tablets. Analyst Shaw Wu at Sterne, Agee & Leachtold Bloomberg that he expects 45 percent of Dell’s business is vulnerable to Apple. That’s not just because the consumer market likes iPads and MacBooks, but also because enterprises and small to medium businesses are adopting the iconic machines.

There’s also a challenge to Dell’s core PC business on the consumer side because the PC is increasingly seen as a dinosaur. Today, Gartner released PC shipment sales for Europe and the U.S. that shows that while Dell’s market share increased by tens of basis points, overall units sold declined by 12.7 percent in Europe and 11.8 percent in the U.S. from the second quarter of the previous year. And while Michael Dell said on the results call that plans for the Windows 8 tablet are coming along well and that it still supports Android, these are not the tablets people are buying. Just last week, Dell canceled the five-inch Streak tablet/phone combo.

The cloud is strong now, but it could evaporate.

The server business isn’t so grim, although Dell did mention a weakness in public sector buying of servers and computers. However, the company is in the midst of transition from a low-margin server seller and a reseller of other companies’ products to a purveyor of its own, higher-margin gear.

Forrest Norrad, head of DCS

This seemed to cause analysts much chagrin as Dell saw revenue in its storage business drop rapidly after it stopped reselling EMC gear to focus on building up its portfolio of storage products.Analysts were concerned that a similar gap could occur as Dell transitions to selling its own networking gear after the Force10 acquisition.

But there’s another threat on the server side, which is Facebook’s Open Compute effort and the creation of a community of IT buyers that wants to eliminate the middlemen in server sales and go directly to ODMs such as Quanta to get exactly the type of servers they want and need. And while Dell can adapt to serve the needs of large webscale and IT buyers — it has in many ways with the creation of Dell’s Cloud Computing Solutions group for webscale customers — its inability to do so in the past partially led to the need to create a new way of looking at servers designed specifically for companies such as Facebook, Rackspace and others. Even investment banks are looking at ways to use the standard to create their own hardware.

That’s a looming threat, but a direct one. Less direct is the result of governments and SMBs that are big Dell clients moving their businesses to cloud providers. Unless Dell ensures it’s a supplier to those cloud providers (and Open Compute may make that more difficult or less profitable), it could find itself with its own Dell gear and few folks to sell it to.

The narrow path for Dell.

So Michael Dell is stuck trying to find a way to reinvigorate a consumer business where its name is synonymous with the aging PC, while developing tablets and other mobile devices to sell to both consumers and businesses. Winning against Apple in this realm won’t be easy, and there’s also plenty of low-cost Chinese competition that’s moving into this sector including ZTE, which Dell currently resells.

Meanwhile, the cloud that these mobile devices connect to may not be powered by Dell boxes anymore, but instead by gear made by the same company Dell uses to manufacture its products. So Michael Dell must hope that he can boost the higher-margin Dell-branded technology and IP to a point where it can win over enterprises and businesses.

It will also rely on services such as those to get people up and running on the cloud faster. Recent news around its Crowbar tool is an example of how Dell’s taking this road — it’s adding value to its server business by easing the task of deploying cloud computing and big data software onto them. Let’s hope the path opens up a bit to leave Dell with room to maneuver.