This should be of Interest to FFIV shareholders in the light of the Dell OEM agreement:
By Richard McCaffery April 7, 2000
Direct sales computer company Dell (Nasdaq: DELL) is making waves in the computer world with its Internet
strategy, a plan that involves formally shifting focus from PCs and notebooks to servers and Internet infrastructure.
It's not really new. Dell has made rapid progress growing its server and storage business over the last year. Its already captured 25% of the U.S. server market, more than Hewlett-Packard (NYSE: HWP) and IBM (NYSE: IBM) combined, according to CEO Michael Dell. Roughly 15% of Dell's $25 billion in sales last year came from servers.
Dell's announcement yesterday that it will focus on supplying and building Internet infrastructure products and services for small and medium-size businesses was really just a formalization of what the company's been moving toward for the last year.
Nevertheless, the Round Rock, Texas company is chasing the market with its usual abandon. In a meeting with analysts yesterday, Dell said the company has already passed Compaq (NYSE: CPQ) in some areas of the server market. Compaq holds the top spot in the U.S. server business.
But Dell won't use Compaq as a benchmark. Rather, it will have to compare itself to Sun Microsystems (Nasdaq: SUNW) , the go-go manufacturer of high-end server products. Sun has positioned itself as the dot-com infrastructure leader. "This is ground zero for Dell's business," Dell told analysts when speaking about the server market for small businesses. "If we don't win here we are not succeeding. Sun is the number one competitor to measure us against."
Dell said his company has two key advantages. First, lower-cost servers now have the functionality to compete against higher-end products. Second, Dell doesn't think Sun will fully support Linux, the open source software system. "My belief is that Sun will not embrace Linux, and this is a huge opportunity for us to move right into their space," Dell said.
In an interview on Bloomberg yesterday, Kevin Rollins, Dell's vice chairman, said the market for Internet infrastructure spending will rise from $124 billion today to $370 billion by 2003. Dell wants $25 billion to $30 billion of that market, Rollins said, and 40% to 50% of those revenues will come from servers and storage equipment.
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