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Dell sees growth, service shift

Despite the gloomy outlook for PC demand, the company expects another banner year, but its customer service program is changing.

Despite the gloomy outlook for PC demand, Michael Dell expects another banner year, but the company's customer service program is changing.

Speaking at an analysts' briefing in New York today, Dell Computer's (DELL) CEO and other company execs said that annual unit sales growth rates will be solid for the next two years. "We believe growth rates in the industry will exceed 15 percent between now and 2000," Dell said.

In addition, Dell predicted that his company will handily exceed that growth rate. For the past few years, the Texas-based direct vendor has taken share from competitors and grown faster than the most of the industry. In other words, even if industry demand slows, Dell will continue to surge.

"What we're looking at whether it turns out to be 14 percent or 18 percent is a matter of indifference to us," Dell chief financial officer Tom Meredith said, "because we're driving at a multiple of that."

Over the last six years, Dell revenues have risen by an average of 55 percent per year.

Dell's predictions for overall growth are slightly more optimistic than analysts' opinions. International Data Corporation (IDC) is predicting 15 percent growth for the U.S. in 1998 and 13 percent growth rate worldwide. "Demand is good. It's not great, but it's good," said Kevin Hause, computer analyst for IDC.

Last year, computer sales grew 19 percent domestically and 15 percent worldwide, according to IDC.

Dell expects strong performances from high-margin products like network servers and notebooks, as well as strong growth in international markets. "We think there is a significant opportunity for us to grow outside the United States," Dell said. "The engines are turned on full steam in Europe."

The company is revamping its customer service component significantly because of broader changes in the industry. In the past, the direct PC firm has relied heavily on Digital Equipment's Multivendor Customer Service unit, a large force of more than a thousand technicians, to provide support, networking advice, and repair work for Dell's far-flung customers.

After Compaq Computer bought Digital, that relationship became fated. Dell started to distance itself from Digital soon after the deal was signed by awarding incremental support contracts to other providers. More recently, it signed an extended support deal with Wang.

"They've been moving in that direction for some time," added Hause.

While a number of companies will vie for Dell's business, replacing Digital may not prove easy. A number of computer resellers and integrators who compete for business accounts against Dell have told CNET's NEWS.COM that customers generally give high marks to Dell's field service.

The company also plans a shift in its marketing strategy--the addition of a major advertising campaign. Executives said the effort would likely include television spots aimed at overcoming what they see as a lack of name recognition. Dell has not been active in television advertising in the past.

Reuters contributed to this report.