Dell Speeds Its Remaking as an IT Solutions Provider

 
 
By Jeffrey Burt  |  Posted 2005-04-07
 
 
 
AUSTIN, Texas—Dells evolution from computer maker to IT solutions provider will pick up speed over the next few years.

At Dell Inc.s annual meeting with analysts here Thursday, executives said the company will continue to emphasize its growing businesses outside of PCs as it moves toward its goal of $80 billion in revenue within the next three years or so.

"Were achieving scale in business categories that are going to take us beyond Dell PC," Dell CEO Kevin Rollins said. "PCs, while they will continue to be important to us, will become less important."

Instead, new businesses such as printers and flat-panel displays will join with more established segments, such as servers, storage and services, in driving Dells overall growth, Rollins and other executives said.

In 2003, the Round Rock, Texas, company changed its name from Dell Computer Corp., with officials saying that it was growing beyond computers. The PC business accounted for about 40 percent of Dells $49 billion in revenues during fiscal year 2005. When the companys revenues reach the $80 billion mark, that percentage should drop to between 30 percent and 35 percent, Rollins said.

Growth also will be fueled by business in countries outside the United States, he said. In the last fiscal year, non-U.S. business accounted for 38 percent of Dell revenues, Rollins said. He expects that to reach as much as 45 percent by the time Dell hits the $80 billion goal.

Read more here about Dells growth goals.

Some analysts questioned whether Dell could continue to grow at its current rate while de-emphasizing PCs. They said many new products—such as printers and software—are dependent on being bundled with PCs as they are sold.

But Rollins said many of the new products are PC-related, not PC-dependent, and that they will mature into their own businesses.

Dell will be helped in reaching its revenue goals by the fact that it holds only about 5 percent of the overall global IT market, giving the company a lot of headroom for growth, Rollins said.

There also are a number of challenges under way in the IT industry, from IBMs sale of its PC business to Lenovo Group Ltd. for $1.75 billion to new leadership at Hewlett-Packard Co. and Sony Corp.

"For Dell, turbulence represents opportunity," Rollins said.

Dell had set a revenue target of $60 billion in the coming years, but it raised the figure given the growth of its product businesses and the new technology being developed—such as dual-core processors and virtualization—that officials said will help drive demand for IT resources.

In particular, they will drive demand for industry-standard technology, which is the core of Dells business and scale-out enterprise strategy. Dell envisions future data centers that rely on smaller one-, two- and four-way systems linked together to create a powerful computing environment.

All of that will play into Dells strength, Rollins said, given the companys partnerships with vendors such as Intel Corp. and Microsoft Corp.

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