It's no longer just about PCs - Dell boss

An associate describes Michael Dell as 'constantly online, constantly working and constantly in touch'. Photo / Supplied

When Salesforce.com Inc chief executive officer Marc Benioff wanted ideas about how to run his business during the technology recession of 2001, he turned to his friend Michael Dell.

Dell's advice: "Economic difficulties are a time when companies can reassess where they are in the market and rebuild themselves rapidly," says Benioff, who has known Dell Inc's founder and CEO for 20 years.

Now Dell is trying to follow his own advice. Since returning as CEO of his namesake personal-computer company in January 2007, Dell, 44, has made 10 acquisitions, cut more than 10,000 jobs, outsourced 40 per cent of production and entered the smart-phone market in China. The goal, Dell says, is to diversify beyond PCs, which he started selling from his University of Texas dorm room in 1984 at the age of 19.

"You're starting to see a real reshaping of the Dell portfolio and Dell business away from some things that were pretty important for us in our first 25 years," Dell said. "We're doing some new things that will be more important for our next 25 years. We're making progress."

To reduce its reliance on PCs, which account for more than half of revenue, Dell has expanded into markets such as computer storage and services and announced the US$3.9 billion buyout of Perot Systems Corp last month.

Dell said in the interview that he would consider more acquisitions or partnerships that expand the company's sales to healthcare companies, which account for more than half of Perot's revenue.

INVESTOR CONCERNS

The pace of the overhaul, though, has left some investors and analysts unimpressed.

The Round Rock, Texas-based company's shares have lost 35 per cent since Dell ousted his hand-picked successor, Kevin Rollins. During that time, Armonk, New York- based International Business Machines Corp has jumped 29 per cent and Palo Alto, California-based Hewlett-Packard Co gained 11 per cent.

PCs represented about 60 per cent of sales at Dell for the past three years, down from almost 80 per cent in 2000. Services accounted for 10 per cent of sales last year. Dell dropped to third place from second in the global PC market last quarter, Framingham, Massachusetts-based researcher IDC said.

At Hewlett-Packard, which retook the PC lead from Dell in 2006 and has worked to expand its software and services business, PCs account for about one-third of sales.

"The best thing that Michael Dell can do is take PCs off the table and diversify," said Ben Reitzes, an analyst with Barclays Capital. "He's starting to do that, but he's late."