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Technology Stocks : Dell Technologies Inc. -- Ignore unavailable to you. Want to Upgrade?

To: jim kelley who wrote (35961)	3/29/1998 12:34:00 AM
From: Gabriel008	Read Replies (1) \| Respond to of 176387

Jim, here's an interesting article from IBD [below]. Check out the last paragraph. We discussed DELL's response to the CPQ/DEC merger a while back but we're still waiting for DELL to either acquire a services company or establish a strategic services partnership [… la Wang]in each of its enterprise product segments. Computer Makers Have New Mantra: Services Date: 3/30/98 Author: Norm Alster Do computer manufacturers have to sell services these days? ''If you can't compete on cost in manufacturing or distribution, you need services,'' according to Barbara Babcock, vice president of marketing and strategy with the Information Systems Group at Unisys Corp. For Unisys, as well as for International Business Machines Corp., Digital Equipment Corp., Fujitsu Ltd.'s Amdahl Corp. unit and others, services have been corporate saviors. Consider: IBM in recent years has seen negligible revenue growth in many of its hardware and software businesses. But it's been expanding services at annual rates of 12% to 19% over the last three years. Services last year brought in $25.7 billion for IBM -about a third of its revenue. When Compaq Computer Corp. said it would buy Digital Equipment Corp., it was chiefly interested in Digital's $5.8 billion services operation. Insiders say Compaq originally wanted just the services unit, having little interest in the rest of Digital's $13 billion business. Struggling large systems vendor Amdahl now derives nearly 60% of its revenue from services. That's up from 20% just five years ago, says Chuck Foley, Amdahl's vice president of systems marketing. For these and other companies better known for their computers, services have represented growth. Services are often the decisive factor in satisfying major customers. And increasingly, service capability is what makes or breaks a deal. ''There weren't too many deals that were decided five years ago based on our service proposition,'' noted Larry Hambley, president of the Sun Service Division of Sun Microsystems Inc. ''But there are many deals today on the server side where the service component of the decision is at least as important as the product component -and in many cases even more so,'' Hambley said. Sun is a prime example of a company that has muscled up in services to support broader strategic aims. Many of Sun's service offerings are designed to promote the Java programming language and platform so critical to its future. Sun never used to be known as a big force in services. But after increasing that revenue at a roughly 40% annual clip for several years, Sun now derives well over $1 billion a year from services. Its total revenue in fiscal '97 was $8.6 billion. Computer services embrace a lot of territory: hardware maintenance and repair; managing client computer systems; designing, implementing and running corporate networks; and systems integration and consulting. Increased competition in such services as running PC help desks and managing customer networks is driving many players toward the more stable profitability of systems integration and consulting. Ever since IBM landed a contract to manage Xerox Corp.'s computer operations a decade ago, so-called outsourcing has emerged as a major revenue source for systems providers. IBM derives well over $5 billion a year just from outsourcing - managing customer computer systems. IBM derives about the same amount from systems integration work. Other firms have raced to duplicate IBM's success in services, sometimes learning painful lessons before establishing themselves as profitable players. Unisys is one company that ran into problems trying to expand its service operations. ''We grew very fast from 1993 to 1995 in services, but we didn't do it very profitably,'' Babcock said. Unisys has focused most recently on leaving unprofitable sectors. Health care, for example, has been ''de-emphasized,'' Babcock says. Digital, like many other large systems companies, has had to offset declines in traditional maintenance and repair revenue with new services in electronic mail and messaging, in data warehousing and in integrating Microsoft Corp.'s NT operating software with other computer systems. Digital also has learned that large ''desktop management'' contracts, which involve supporting PC users, can mean huge dollars but thin, and delayed, profits. It took seven quarters before a huge contract to manage desktops for Citicorp could actually be called a moneymaker. In revealing plans to buy Digital, Compaq CEO Eckhard Pfeiffer cited Digital's ''25,000 highly skilled service professionals.'' Skilled service personnel are hard to find in today's tight labor market. So for firms like Compaq that want to become instant players, it may make sense to buy rather than build a service operation. Of the major computer makers, Dell Computer Corp. is now the only one without a major services business. If Dell reaches the same conclusion that its rivals have, it too will be on the prowl for an established services provider.