Dell to Expand Data Management, Software to Cut PC Reliance
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Dell Inc. (DELL), the world’s second- largest personal computer maker, will offer software applications and more corporate-data management technology to reduce its reliance on PC sales, Chief Executive Officer Michael Dell said.
The company wants to build on sales of servers and storage systems by offering hardware and software to help catalog and locate reams of data, he said at an annual investor meeting today. Dell, based in Round Rock, Texas, also plans to step up its presence in smartphones and tablet computers, he said.
Dell is making acquisitions, broadening its offerings and hiring sales staff to expand beyond PCs and related products, which accounted for 70 percent of sales last fiscal year. The company seeks to offer corporate customers a more complete lineup of products to run technology operations, Dell said at a reception last night before the meeting in Austin, Texas.
“Instead of selling ingredients like servers and storage, we’re selling the whole data center,” he said, adding that the areas targeted for expansion can provide higher profit margins than the 23 percent reported in the fiscal first quarter. “It’s the evolution of where storage goes.”
Vice Chairman Jeff Clarke said today that the company will also design tablets and smartphones for business users rather than market consumer-oriented devices.
“This isn’t about being another player in consumer smartphones and tablets,” he said. Microsoft Corp.’s upcoming Windows 8 will be a “very good operating system” for notebooks and tablets, Clarke said.
Dell rose 41 cents, or 2.6 percent, to $16.42 at 4 p.m. New York time in Nasdaq Stock Market trading. The shares have gained 21 percent this year.
Chief Financial Officer Brian Gladden said that mergers and acquisitions “will continue to be an important priority. We’re being selective and patient as we think about the acquisition strategy.”
The company plans to buy back more than $2 billion in stock this fiscal year, and so far has repurchased $1.6 billion, according to a statement yesterday.
Dell’s revenue from desktop PCs has tumbled 32 percent in the past five years, data compiled by Bloomberg show. Attempts to enter the mobile-computing market, including its Venue Pro smartphone and Streak tablet, haven’t found broad markets. Global PC shipments fell in the first quarter, and consumers have been curtailing purchases of desktops and laptops in favor of tablet computers such as Apple Inc.’s iPad.
“The bigger question is, is the business model broken, and what’s the catalyst to get the shares moving again?” said Jeff Schwarte, a portfolio manager at Principal Global Investors in Des Moines, Iowa, who manages about $3 billion and sold his Dell shares in February.
Dell is aiming to double the size of its server, storage, networking and storage business to $30 billion in sales through acquisitions and increased spending on research and development.
The company plans to spend $1 billion during the next two years to open 10 data centers that will make it easier to sell cloud computing services to customers.
“It’s time for Dell to get into the conversation about the business benefit of these technologies,” Steve Schuckenbrock, the company’s services president, said in an interview this month.
Dell also has benefited from businesses replacing older PCs with new ones running Microsoft’s Windows 7 operating system.
The company is starting an $80 million advertising campaign this month that was created by Young & Rubicam Inc. to show consumers and businesses the breadth of its products.
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