Dell maps out its plans for growth

Dell Computer laid out its strategy for doubling its revenue within the next few years at its annual meeting.

Dell Computer laid out its strategy for doubling its revenue within the next few years at its annual meeting.

While other suppliers, such as IBM, are expanding their software and services businesses to compensate for what they view as a commoditising, low-margin hardware sector, Dell is comfortable remaining heavily exposed to that market, said Dell chairman and chief executive officer Michael Dell.

Dell's closely watched drive for a larger presence in the enterprise market is going well, executives said, as Dell establishes partnerships and extends its product line to boost sales of servers, services and storage hardware.

Helping Dell on its enterprise push is rising customer demand for inexpensive hardware on which to run standard operating systems such as Linux or Microsoft's Windows.

"The push toward industry standards-based systems is moving higher and higher up into the enterprise," Dell said. "Standards are the future of enterprise computing."

Earlier this week Dell intensified its alliance with Oracle, and chairman, with CEO Larry Ellison championing Linux as the enterprise operating system of the future.

"I believe that in a couple of years, Linux and Dell will be the dominant computing combination in the enterprise," Ellison said.

Storage supplier EMC is another key Dell partner. This week both companies began worldwide manufacturing of jointly branded storage systems, and introduced new storage area network bundles aimed at smaller businesses.

International expansion is also key to Dell's quest to double the company's revenue within the next few years. In many markets outside the US, Dell's market share remains in the single digits, said president and chief operating officer Kevin Rollins.

Other new forays, such as Dell's entry into the Hewlett-Packard-dominated printer market, are about long-term positioning rather than immediate sales growth, Rollins said.

in the services arena, Dell will pursue "more mundane" but higher-margin services jobs.

While Wall Street analysts covering Dell appear comfortable with the company's confident predictions about its sales and future growth, several said that the IT industry's continuing downturn could yet thwart Dell's ambitions.

"We remain concerned over the deterioration in industry IT demand since late January, especially in the US with some potential signs of a slowdown in Europe," said Lehman Brothers Holdings analyst Dan Niles.

Merrill Lynch cautioned that enterprise IT demand, particularly in the storage market, is a "swing factor" in Dell's plans. Share gain should give Dell some buffer, though, to weather a rough economy, the research firm said.

Meanwhile, Dell executives said the company would continue its push into new market segments.

Last year, Dell posted $35.4bn in annual revenue, most of which came from PC sales. By the time it hits its growth target and increases revenue to $60bn annually, the company's goal is to draw less than half its revenue from selling PC systems, with the rest coming from servers, storage, services, software and peripherals.

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