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Dell sees continued growth

Dell, recently ranked the No. 1 supplier of desktop PCs to U.S. corporations, plans to build on that track record.

    SAN FRANCISCO--Dell Computer (DELL) expects workstations and its position in the corporate market to continue to be its market-drivers, but the consumer market also has been slated as an accelerator, the company's chief financial officer said at an analyst conference today.

    "The past is all preface to a very bright, bright future," said CFO Thomas Meredith.

    Dell, which recently was ranked the No.1 supplier of desktop PCs to U.S. corporations for the most recent quarter, climbed over Compaq (CPQ), according to a marketing research firm. And the company's plans for global expansion and diving into the consumer arena are building on that track record.

    Gregory Goldberg, managing director at Prudential, said Gateway's custom-build mail-order business for consumers is broken and that Dell plans to take advantage of that by becoming more aggressive in that area.

    He explained that as a direct supplier of personal computers to the consumer market, Gateway was very efficient. However, the company's recent acquisition of workstation- and server-maker Advanced Logic Research upset that single business model, and Gateway now is reaching out to the corporate market, he said.

    "The company now has two distribution models, and that could be some of the problem," Goldberg said.

    New computers from ALR nudge parent company Gateway into a more indirect sales strategy for certain models and into corporate territory currently dominated by leading PC vendors such as Compaq and IBM.

    "This lets Dell move in [to the consumer market] while Gateway is down," Goldberg said.

    And that is good news for Dell, who says its brand identity is not very high in the consumer marketplace. The company recently hired an agency to boost its brand-name recognition, said Dell's Meredith.

    Meanwhile, the company has high hopes for its server and workstation sales.

    Meredith said he would be surprised if workstation sales didn't ramp up faster than that of servers. One analyst who attended Dell's presentation at the Montgomery Securities investment conference said Dell expects its server line to make up about 15 percent of revenue in the coming years, up from 8 percent this year.

    Anne Coale, an analyst with Connecticut Capital, said Dell is seeing server prices of $2,650 to $2,800, which is down from year-over-year figures but ahead of forecasts. Pricing pressure has eroded away some of the margins, but Dell is still strong compared to its competitors, she said, adding that if Dell can achieve its projected growth to 15 percent, more strong earnings will result.

    And Dell continues to sing the praises of electronic commerce. Meredith boasted sales of over $2.5 million a day from the company's Web site. That sales figure is up from June, when the company said it was generating $1.5 million in sales per day.

    "The Internet is the ultimate extension of the direct model," said Meredith.