The move comes as Dell continues its transformation from PC box maker to a company that sells higher-margin IT solutions to businesses.
Dell executives are looking to pare
$2 billion in expenses over the next three years as the company continues to
expand its enterprise business while trying to shore up its core PC business.
Meeting with analysts June 13, CEO
Michael Dell and CFO Brian Gladden spoke about the companys continuing
transformation into a complete IT solutions provider, a higher-margin business
that offers potential for solid growth and protects Dell from the slowing sales
of consumer PCs, which are under pressure from the rise of mobile devices like
smartphones and tablets.
Michael Dell said that as the tech
world changes, so must companies like his.
As you think about our industry,
its constantly in transition, he told the analysts at the meeting in Austin,
Texas, which also was Webcast online.
According to Dell officials, much of
the $2 billion will come from the supply chain and sales group, some of that
prompted by changes in the companys business focus. For example, as much as
$600 million will come through simplifying product lines and consolidating
manufacturing operations, while another $800 million will come via
consolidating sales and marketing, according to the company.
Dell, the worlds third-largest PC
maker, also is looking to consolidate its own IT platform, which will result in
another $200 million in savings. Officials did not say whether job cuts would
Throughout the meeting, Dell
executives continued to champion the companys enterprise IT strategy. Much of
that has been fueled by a steady stream of acquisitions as company officials
have looked to build up Dells capabilities in such areas as enterprise
servers, storage, networking and software. Dell has bought eight companies over
the past 12 months and created a software group.
Dells first-quarter numbersa 4 percent revenue drop
and 33 percent decrease in profitsfell short of expectations, but company
executives at the time reiterated their belief in the shift toward enterprise
solutions. In addition, Dell officials have noted that half the companys gross
margins and 30 percent of revenues in the first quarter came from enterprise
solutions and services, and the company expects that its enterprise solutions,
software and service business will grow 10 percent a year through 2016.
Dells analyst meeting came as the
company was winding down its Dell Storage Forum in Boston, where the company unveiled
new enterprise-focused offerings, including its Converged Blade Data Center and a host of storage and networking technologies.
In an interview with eWEEK at the Boston event, Brad
Anderson, president of Dells Enterprise Solutions Group, talked about the
Were selling full solutions here,
Anderson said, noting that its a departure from Dells legacy of being a PC
and server maker. Thats kind of different. ¦ Were getting away from building
boxes to building solutions.
In addition, while the company
before was known for its extremely efficient supply chain and manufacturing
process, Dell also is becoming a more innovative company, he said. While the
vendor is aggressively buying technology companies to build out its
offeringsthink Compellent, EqualLogic, Wyse Technology, SonicWall and Force10
Networks, among othersDell also has grown its engineering teams by 50 percent.
Gladden, the chief financial
officer, noted during the analyst meeting that acquisitions will still be an
important way for Dell to expand its enterprise capabilities in such areas as
storage, networking and software. Michael Dell agreed.
"We have a modest software
business, and that's an area where we can grow rapidly," he told the
analysts, adding that Dell has "some nice acquisitions, which are off to a
During the analyst meeting,
Dell executives said that while the company was becoming more of an IT
solutions vendor and not simply a PC maker, the PC business was still
important, not only for the money it brings in but also as a way into
businesses and emerging markets. If Dell can sell PCs into those places, then
the company can begin trying to up-sell higher margin solutions and services.