Dell eyes services, devices

Although its PC business is still growing strong, Dell Computer is expanding deeper into consulting and Internet access and may even move into areas such as Web hosting and selling devices, chief executive Michael Dell says.

Michael Kanellos Staff Writer, CNET News.com
Michael Kanellos is editor at large at CNET News.com, where he covers hardware, research and development, start-ups and the tech industry overseas.
Michael Kanellos
4 min read
LAS VEGAS--Although its PC business is still growing strong, Dell Computer is expanding deeper into consulting and Internet access and may even move into areas such as Web hosting and selling devices, chief executive Michael Dell said.

Speaking at a breakfast meeting with reporters at Comdex here, Dell outlined his vision for the company's future and, increasingly, it will include providing services and other products beyond traditional PC products. Historically, Dell has concentrated less on ancillary markets than other PC makers.

The shift into new markets will be gradual and not in all likelihood change Dell's overall business just yet. Change nonetheless is afoot because the opportunity exists to sell new products to Dell's huge existing base of corporate customers.

Warranty and consulting services, for instance, represent a minority fraction of Dell's revenue right now. However, the services group as a whole "is growing faster than all of Dell," he said.

"These are closely related businesses that we are getting into. You are going to see us integrating more content, services and access," he said. "We're quite interested in Web hosting and the ASP [application service provider] business," he added.

Internet and communication devices may also be an area that Dell will begin to explore. But he didn't sound too keen on one such device from ally Microsoft: the Web Companion device that Microsoft chairman Bill Gates described in his Sunday keynote.

"We're certainly not going to sell every [device] that comes around and that may not be one that makes the list," he said.

But he did say that "you may see us market other devices." Next week, Dell is expected to announce that the company will begin to market two-way "Blackberry" pagers made by other manufacturers, according to sources. (See related story.)

Dell declined to further comment on future products.

But any move into devices or services will likely be conservative. The expected move into pagers, for instance, will be fairly gradual.

Dell faces a similarly slower move into Web hosting and ASP work. The company is looking at both opportunities, but a decision whether or not to get into both markets has not been made. "We have to evaluate our resources, our capabilities, competitive factors," he said.

Web hosting and ASP services are essentially the digital version of real estate management. Companies that do not want to build or maintain their own web sites or back-end applications outsource it. Several analysts have said that both areas show strong growth potential. IDC, for one, predicts that the ASP market--which includes hosting of e-commerce, email and other business applications--will grow to $2 billion by 2003, representing a 91 percent annual growth rate.

Comdex: Closing the millennium One area that Dell will not likely give much support to, however, is Sun's StarOffice effort. Sun has launched a plan to let companies access standard office applications such as word processing and email for free, applications that exist on a server. While the plan might look good in theory, converting to a new set of applications could well cost more than sticking with the existing versions, he said.

Dell also took time to take a jab at Sun CEO Scott McNealy, known for his anti-Microsoft statements.

"It's a bit of a hard sell. McNealy 's comments at times are not doing him justice. In a sense, he is insulting the strategies of his customer base." Dell then could not think of a recent statement of McNealy's and said "Maybe he is calming down in middle age. Maybe not."

Further, Dell said that the PC is here to stay and is far from dead, and devices represent a long term challenge to traditional manufacturers.

"A lot of people miss the fact that the devices are not replacements for the PC but are complements to the PC. These things just addict you more to information. Could some potentially replace the PC? Sure. This is one of the more significant long-term issues."

The free PC phenomenon, a yet-to-be-tested model, may be in for rocky times because, after all, the PCs are free. "When people say free, what they really mean is subsidized," he said. Marketers like to substitute "free" as a word "until their Senate hearing," he added.

Dell dismissed speculation that the company will begin to use dealers and resellers more to sell their PC and products. "We are basically a direct company. Do we have a plan to recruit resellers and let them do a mark-up on or products? No."

An obvious indicator of strong PC growth, he said that Windows 2000 will be big, even though not everyone will buy it at once. "I think it will be a big catalyst for overall demand, even if they don't run out and buy it on February 17th."