Dell Inc. (DELL) is targeting annual software sales of $5 billion in the coming years, more than triple current levels, as it expands beyond computer hardware, said John Swainson, president of the software division.
Dell, the Round Rock, Texas-based computer maker, also will probably eschew large software-related acquisitions as it digests the pending purchase of Quest Software Inc. (QSFT), Swainson said during a roundtable discussion in San Francisco. In several years, he hopes software will contribute a quarter of Dell’s profits as the company transitions from selling personal computers to data-center equipment and software.
“You have this huge PC business,” he said in an interview after the event. “To have an impact on Dell’s bottom line, you have to have a meaningful software business.”
Dell said in June it may exceed $2 billion in software sales in fiscal 2016. Quest will add almost an additional $1 billion to that, Swainson said.
“My real target is more like three in the ’16 time frame,” Swainson said. Over the next 12 months, the software group is on track for about $1.5 billion in sales, he said.
Since retaking the reins as CEO in 2007 of the company he founded, Michael Dell has been making acquisitions and expanding development of computer hardware and software used to run corporate data centers and lessening reliance on PC sales. Dell agreed to buy Quest for $2.4 billion on July 2 after a bidding war with Insight Venture Partners.
The $5 billion software tally would come several years down the road, according to Swainson. Dell plans to build or acquire software in areas including computer security, PC and server management, data analysis and business applications for midmarket customers, he said.
That means Dell would increasingly compete with BMC Software Inc., Microsoft Corp. (MSFT), Hewlett-Packard Co. (HPQ) and International Business Machines Corp. (IBM) in so-called system- management tools to administer fleets of servers and PCs. It may also compete with SAP AG (SAP) and Oracle Corp. (ORCL) in some segments of the business-applications market, said Swainson.
DuPont Co. chief information officer Phuong Tram said in a recent interview that the largest hardware companies are adding software and other technologies to serve more of CIOs’ needs.
“Companies like IBM, HP and Dell have to provide a computing platform with the server and the software as a service,” he said. “That’s what all these acquisitions and vertical integration are about.”
Swainson joined Dell in March from investment company Silver Lake Partners. He was CEO of CA Inc. from 2005 to 2009 and previously worked for 26 years at IBM.
Dell rose 1.3 percent to $12.23 at the close in New York. The shares have lost 16.4 percent this year, compared with a 9.5 percent gain in the Standard and Poor’s 500 Index.
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