Michael Dell spells out strategy for market defiance

Dell Computer issued a number of major announcements last week. The company revealed profits of more than $500m (£328m) for the...

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".
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.

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