GreenBkk.com Tech | Dell sees acquisitions as critical focus

Dell sees acquisitions as critical focus

A man wipes the logo of the Dell IT firm at the CeBIT exhibition centre in Hannover February 28, 2010. The world's largest IT fair CeBIT opens its doors on March 2 and runs through March 6.
Credit: Reuters/Thomas Peter

By Poornima Gupta
AUSTIN, Texas | Wed Jun 29, 2011 10:02am EDT

(Reuters) - Dell Inc (DELL.O) expects acquisitions to remain a critical focus for the computer maker, which is expanding into areas such as storage and services, according to its top executives.

Dell, which has been moving beyond its traditional personal computer market, acquired eight companies last year.

"We are being selective and patient as we think about our acquisition strategy, and we think we can deliver strong returns on the deals that we do," Chief Financial Officer Brian Gladden told attendees at the company's annual analyst conference on Wednesday.

Dell told Reuters in May that it was on the hunt for acquisitions of companies with valuations of $1 billion to $5 billion that can help it be a one-stop shop for corporate technology needs.

The company, which still generates most of its revenue from desktop computers, is moving to diversify into the fast-growing tablet and smartphone markets as well as such businesses as data center equipment.

But Dell faces stiff competition in data center computing from the likes of International Business Machines Corp (IBM.N) and Hewlett-Packard (HPQ.N), while it has to contend with rivals such as Apple Inc (AAPL.O) in mobile devices.

The company will focus on "midmarket opportunities," including small and medium businesses in the public sector and healthcare industry, as it looks for long-term revenue growth of about 7 percent, Chief Executive Officer Michael Dell said at the event.

After posting blowout first-quarter earnings this year, executives at the analyst day said they expected to maintain most of the company's margin improvements.

Dell's first-quarter gross margin was 23.4 percent, the highest since the same quarter in 1992. The company has been focused on wringing efficiencies out of its supply chain, helping boost margins.

"We have also spent a lot of time optimizing our supply chain," Michael Dell said. "That has made Dell much healthier and much more competitive."

The company sees storage technology generating $4 billion to $5 billion in revenue by fiscal 2015, CFO Gladden said.

He said Dell's technology services business would generate $10 billion to $11 billion in revenue by fiscal 2015. The company, which has steadily conceded market share to Hewlett-Packard Co (HPQ.N) and Acer Inc (2353.TW) in past years, has shown good progress on improving margins by moving into higher-margin enterprise solutions and services.

Dell shares were up 0.1 percent at $16.02 in morning Nasdaq trading.

(Reporting by Poornima Gupta in Austin, writing by Sinead Carew in New York, editing by Gerald E. McCormick and Lisa Von Ahn)

Credit: Reuters (www.reuters.com)