Dell touts services plans at Chase H&Q conference
SAN FRANCISCO--Dell Computer may be best known for its direct sales of laptops and desktop computers, but it wants to lay claim to being the premier one-stop shop for every company's or individual's digital needs.
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Five years from now, said Dell chief financial officer Jim Schneider, Dell will perceive itself not as a computer dealer that competes against Compaq Computer and IBM, but as a full-service computer consulting and sales behemoth that competes against Sun Microsystems and other software and professional services giants.
"Dell will help companies build online businesses of all sizes," Schneider said Monday at the Chase H&Q Technology Conference here. "The more we can push out our enterprise server and storage business, the better...Our core business is very sound and growing, but again, we've got a big push."
One of Dell's biggest expansion efforts centers on consulting services--especially to so-called old economy Fortune 1,000 companies that want to build the e-commerce divisions of their businesses. The Round Rock, Texas-based PC maker has become a model of direct computer and software sales online, and it hopes to sell that e-commerce expertise to other businesses.
Schneider estimated that sales, hosting and consulting services could eventually become a $10 billion-per-year business for Dell. The company expects to grow the division by 50 percent annually for the next several years, working with consulting partners such as Arthur Andersen. The company had revenues in fiscal 2000 of $25.3 billion, and it's expected to top $32 billion in fiscal 2001.
Dell conducts about $40 million per day in Internet transactions, with online sales accounting for about half of the company's total business. If the portion of the company devoted to online sales were an independent company, Schneider said, it would rank No. 137 on the Fortune 500 list of America's largest companies.
Dell forecasts that global e-commerce transactions will reach $2.5 trillion in 2003--a 100 percent compounded growth rate from 2000 levels. The number of people using the Internet for transactions will double to 500 million in 2003 and will top 1 billion by 2010. Meanwhile, businesses worldwide are expected to spend $370 billion on Internet infrastructure in 2003.
Expanding from the company's core business of direct computer sales is a shrewd move as the margins in that arena become thin, analysts said. Technology-oriented investment bank Chase H&Q advises clients to buy Dell stock.
"We view Dell as one of the leaders among the PC vendors in moving to leverage the Internet, well positioned to benefit from the Windows 2000 launch and transitioning its mix to more enterprise systems," analysts Walter Winnitzki and Georgia Fountoulakis wrote in a report prepared for the conference. "As a result, Dell is likely to record the strongest earnings growth in the group and could once again be in a position to possibly exceed (earnings per share) expectations, both of which bode well for a higher share price."
Dell shares closed down $1.94 today at $47.94. |
