Dell execs map growth plans

Dell execs map growth plans

Shaking off the economy's lingering slump, Dell Computer used its annual meeting with financial analysts to lay out its strategy for doubling its revenue within the next few years.

While other vendors, notably IBM, were focused on expanding their software and services businesses to compensate for what they saw as a commoditising, low-margin hardware sector, Dell was comfortable remaining heavily exposed to that market, Chairman and Chief Executive Officer, Michael Dell, said.

"We believe our business model is structurally advantaged," he said.

Which isn't to say Dell isn't pursuing diversification.

The company's closely watched drive for a larger presence in the enterprise market was going well as Dell established partnerships and extended its product line to boost sales of servers, services and storage hardware.

Helping Dell on its enterprise push was rising customer demand for inexpensive hardware on which to run standard operating systems such as Linux or Microsoft's Windows.

"The push toward industry standards-based systems is moving higher and higher up into the enterprise," Dell said. "Standards are the future of enterprise computing."

Dell has a new cohort helping him evangelise standardisation: Oracle Chairman and Chief Executive Office Larry Ellison.

Already partners, Oracle and Dell said recently that they were deepening their alliance. The two companies extended an existing US joint sales agreement to incorporate Europe and Asia, and said their consulting organisations would partner on a new set of professional services aimed at customers migrating from legacy systems to an Oracle9i database deployment on Dell server and storage hardware.

Once a staunch ally of Sun Microsystems, Ellison was now vocally championing Linux as the enterprise operating system of the future.

In a recent joint appearance with Dell, Ellison enthusiastically described Oracle's experience with internal migrations from proprietary systems to Linux running on Dell hardware.

At a lower cost, Oracle had recorded gains in speed and reliability, he said.

"I believe that in a couple of years, Linux and Dell will be the dominant computing combination in the enterprise," Ellison said.

Storage vendor EMC was another key Dell partner aiding the company's enterprise growth.

Dell has begun worldwide manufacturing of jointly branded Dell-EMC storage systemd and introduced new storage area network (SAN) bundles aimed at smaller businesses.

International expansion was also the key to Dell's quest to double the company's revenue within the next few years, the company said.

In many markets outside the US, Dell's market share remained in the single digits, President and Chief Operating Officer, Kevin Rollins, said.

Expanding globally into key international markets such as China, Japan, Germany and France was a "tier one" priority for Dell, along with furthering its enterprise offerings, he said.

With those two initiatives as its primary focus, other new forays, such as Dell's recent entry into the HP-dominated printer market, were about long-term positioning rather than immediate sales growth, Rollins said.

While Dell aimed to increase its services business, it viewed the sector differently to rivals such as HP and IBM, the company said.

Like other IT sectors, the services business was commoditising, and routine support and maintenance work represented the bulk of the market's revenue opportunities, Rollins said. Consequently, Dell would not focus on the sort of high-end custom services IBM bought PwC Consulting to address.

Instead, it would pursue "more mundane" but higher-margin services jobs, he said.

While Wall Street analysts covering Dell appear comfortable with the company's confident predictions about its current sales and future growth, several said that the IT industry's continuing downturn could yet thwart Dell's ambitions.

"We remain concerned over the deterioration in industry IT demand since late January, especially in the U.S. with some potential signs of a slowdown in Europe," Lehman Brothers Holdings analyst, Dan Niles, said.

Merrill Lynch, which anticipates no imminent business turnaround, recently cautioned that enterprise IT demand, particularly in the storage market, was a "swing factor" in Dell's plans.

Share gain should give Dell some buffer, though, to weather a rough economy, the research firm said.

Meanwhile, Dell executives said the company would continue its push into new market segments.

Last year, Dell posted $US35.4 billion in annual revenue, the majority from PC sales.

By the time it hit its growth target and increasedrevenue to $US60 billion annually, the company's goal was to draw less than half its revenue from selling PC systems, with the rest coming from servers, storage, services, software and peripherals, Rollins said.

And as Dell repositioned itself as an enterprise vendor, heavyweights in the industry - like Oracle and EMC - were responding, recognising the customer trend toward standardised systems running on commodity hardware, Dell said.

"Now it's kind of shifting, to them coming to us and saying, 'Hey, we'd like to partner with you,'" he said. "We are the most clearly positioned company to stake out this kind of territory."

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