Dell looks to emerging markets, services

Dell, the world's second largest PC seller, will move faster into emerging markets and increase its services offerings as part of a plan to reverse poor financial performance, top executives said Thursday.

While Dell holds about 28 percent of the hardware and services business for small and midsize businesses in North America, that figure falls to 10 percent for the rest of the world, said CEO Michael Dell, during an investor's conference broadcast from Round Rock, Texas.

For every US$1 spent on hardware, businesses spend $2 on infrastructure services, a market that's worth at least $800 billion, which the company can tap into, Dell said.

Dell is targeting that segment with customizable, a la carte services and such features as remote infrastructure management. So far, the plan is working: For the fourth quarter of last year, the company's deferred services revenue grew 25 percent year-over-year, to $5.3 billion, Dell said.

"We are aggressively expanding the services portfolio of the company," Dell said.

On the consumer PC side, Dell has just a 4 percent market share outside the U.S., with most of those sales in the U.K. But Dell will try to increase that through launching new product lines.

Previously, Dell had just one consumer product line that it sold through its direct sales model, but "we are making a number of changes," including creating new product lines faster, Dell said.

The PC industry in general is suffering from lower profits, but Dell said they'll try to create "excitement and brand lust" in their products to draw new customers.

Dell's turnaround plans come amid a gloomy backdrop for the company, which lost its footing in the face of changing market conditions and a decline in its direct sales model.

"We are not satisfied with the current state of affairs," Dell said.

Incomplete product coverage, overpaid employees and general inefficiency dragged the company down, Dell said. But it has shed 5,500 of its more than 80,000 employees, and is readjusting the salaries and benefit packages of existing workers.

The belt-tightening is expected to eventually save Dell $3 billion annually. Still, CFO and Vice Chairman Donald Carty warned: "There's a lot of work left to do."

Dell reported results for its fourth quarter 2008 in late February. Net income came in at $679 million, 6 percent less than for the same period a year before. Revenue for the quarter was $16 billion. Earnings per share were $0.31, down 3 percent from the same quarter of the previous year.

The IDG News Service is a Network World affiliate.