Dell Computer issued a number of major announcements last week. The
company revealed profits of more than $500m (£328m) for the last
quarter and an 18% growth in product shipments.
In addition the company revealed plans to ramp up its professional
services arm and, in a break with the direct sales model, to start
selling some kit through resellers.
Company founder, chairman and chief executive, Michael Dell, spoke
out about the state of the industry and spelt out Dell's company
strategy.
The Dell chief attempted to put the current industry gloom in
perspective. "There were more than 30m computers sold last
quarter," he said. "There is still a lot of money being spent on
IT." However, Dell added, the spending pattern is very different to
how it was at the height of the Internet bubble.
"For example," he said, "When a large investment bank says, 'We're
going to shift from proprietary Unix to Linux on Dell,' their
spending for the proprietary [products] goes from tens of millions
to nothing. Their spending with us goes to maybe 40% of what it
was, but they get more computing power."
The general industry-wide move from proprietary to open products,
Dell said, is bringing down costs. "It's better for customers. It's
not necessarily good for all vendors."
He highlighted the growth of enterprise deployments of Linux during
the last 12 months: "It is clearly eating into the proprietary Unix
platform and it's getting to be a lot more of a pervasive."
One area where the company surprised the industry was in its
decision not to offer Itanium II-based systems. It is a simple
business choice, Dell said. "It's not a volume product. We like
volume products. As soon as there's volume, we're there. To me, the
real story at the high end is high-performance clusters, not
Itanium II," he added.
One area where Dell sees volume opportunities is the printer market
and the company plans to launch a range of printers later this
year. "We're looking at both the inkjet and the laser business,"
Dell said. "We think there's an opportunity to deliver value to
customers in this market. We don't think it's as efficient as it
could be."
The move mirrors the company's decision in 1995 to start
manufacturing servers. The server market "was the next big
opportunity," said Dell. "It was also true at that time that one of
our competitors - Compaq - was dramatically overcharging customers
for those products."
This gave them, in theory at least, the ability to undercharge on
other products, said Dell. "That ended because we entered the
server market and it got more competitive. The opportunity in the
printer market," he said, "is very, very similar".
Michael Dell admits to "a fundamental belief that all technologies
over time commoditise". This process, he claimed, is also
transforming high end IT.
The interesting question now, Dell said, is "what is a mainframe?
What is a supercomputer? This idea of high-performance clusters
could actually be the supercomputer of the future three or five
years from now".
One area where the commodity model does not fit is Dell's move into
professional services. "The professional services area is
people-intensive, and it doesn't commoditise or scale like a
manufacturing process does," admitted Dell. "However," he said,
"there are learned and repeatable tools that can drive costs down.
So you'll see us build that business through organic growth,
through additional small acquisitions".