Dell to march deeper into wireless
Dell Computer will expand deeper into the wireless market as part of its goal of increasing annual revenue to $60 billion in the next few years, the company says.
Speaking Wednesday at Merrill Lynch's Hardware Heaven conference here, Rollins said that Round Rock, Texas-based Dell plans to expand its wireless product portfolio as well as its alliances with wireless device makers. Yesterday, the company said it would resell handheld e-mail devices from Good Technology.
"The Good Technology deal is part of an overall wireless strategy. We believe wireless is the next big thing," Rollins said. "You will see us continue to expand and broaden the product offerings."
True to Dell form, however, the wireless expansion will be conservative. Although the company will likely increase the number of wireless notebooks and PDAs it sells, it has no plans to get into cell phones right now because most of the profit in the cell phone market goes to the carriers, Rollins said. Dell will also work with a variety of companies, such as Good, to develop products that Dell doesn't want to directly create or sell under its own brand.
In other areas, Rollins said Dell will continue its onslaught against its traditional competitors through aggressive cost cutting and a focus on servers, storage systems and PCs made from standardized components. Dell now currently racks up annual revenue of around $35 billion but says it can hit $60 billion in the near future.
Despite the slowdown in PC buying, Dell has continued to expand its market share, Rollins noted. In the first quarter, Dell overtook Hewlett-Packard again to become the largest PC maker in the world. The company is profitable, something many competitors aren't, he said.
"We make money. IBM makes money. Who else makes money? No one," Rollins said, adding that HP turns a profit in printing but not in computing. "We don't believe our competitors are prepared to be as cost aggressive as they need to be...They will have to continue not to make money, or they are going to have to back off to fatten their margins, which will cause them to lose market share."
Rollins added that Dell has been even more aggressive in cost and price cutting this year than last year.
Further, the company is heavily participating in the segments of the industry that are growing. For instance, Dell has not dedicated substantial resources to selling blade servers or servers with eight processors or more. Although these products attract high prices, volumes remain low. Two- and four-processor servers, a Dell specialty, are growing in performance and popularity.
"We will make multiprocessor capabilities for those that want it, but we just don't believe that is the focus of the growth rate," Rollins said. The company will come out with Itanium servers this year, as previously reported, and is continuing to evaluate the Opteron processor from Advanced Micro Devices.
Similarly, in services, Dell will focus on "close to the box" services, such as help desk and asset management. Dell does not want to compete against Electronic Data Systems or Accenture on complex consulting engagements. At the same time, PC services are becoming an unspecialized, mass-market offering, often involving automation, which gives Dell an opportunity to undercut others with price. Low-cost, overseas staffing will be part of the company's strategy.
Rollins used the services discussion to take another dig at HP, which inherited thousands of services employees, many based in the United States, when it acquired Compaq Computer. With new automation tools, large fleets of technicians will become a problem, he said. "Through our lower overhead, through our offshore capabilities, through remote diagnostics, you are seeing (the erosion of) the ability to put feet on the street," Rollins said. "Large armies of people out there will become a liability." Rollins also said that a slight PC upgrade cycle has apparently begun, but the market remains slow.
"We believe there is an upgrade cycle occurring. It is just slow and muted," Rollins said. "We have not seen any change in the marketplace to indicate we are out of the slowness."