Services, printing to help Dell hit $80B in revenue

Dell expects to hit its first-quarter earnings targets and eventually reach $80 billion in yearly revenue through growing printing and services businesses.

Dell plans to build on its relatively new businesses in IT services and printing in order to increase its yearly revenue to $US80 billion over the next few years.

Dell plans to formally unveil its $US80 billion strategy later this week at its analyst meeting in the US.

The company hoped to generate that amount of yearly revenue within the next three to four years, Dell chief executive officer, Kevin Rollins, said.

In 2002, Dell set a $US60 billion yearly revenue target, and the company announced earlier this year that it expects to reach that figure during the current fiscal year, which will end in January 2006.

The company had rarely missed an earnings target since the 2002 announcement, and the first quarter of this fiscal year would be no different, Dell said. It expects to meet the guidance it issued in February for first-quarter revenue of $US13.4 billion and earnings per share of $US0.37 when it reports its earnings on May 12.

In order to reach the next target, lesser-known Dell businesses such as printing and services would have to continue to grow, executives said. Dell was especially focused on sales of printer ink and toner, also known as "consumables", senior vice-president for Dell Americas, Ro Parra, said.

Dell had an opportunity to capture more of the printer market because of how it delivers replacement ink or toner cartridges to customers, he said.

Home printer users had been trained to look for new ink cartridges in retail stores, which can be a frustrating game of "ink cartridge bingo", Parra said.

Dell allows customers to track the ink levels remaining in their cartridges and order new cartridges online by clicking on a link within a print management software application.

It thinks customers wouldl appreciate an easier method of buying replacement ink or toner than trolling the aisles of retail stores, Parra said.

Dell printer executives did not directly address the issue of third-party replacement cartridges, which usually cost less than cartridges sold by printer vendors, but analysts believe the company also hopes its ink-replacement system will dissuade customers from buying their ink elsewhere.

Another growing business that the company highlighted was IT services. Dell's involvement in the services business thus far has been relatively muted compared with competitors such as IBM and HP, which have made services a key part of their businesses.

Dell doesn't plan to compete head-on with those companies, but instead to look to its current hardware customers and identify services associated directly with the deployment or support of Dell hardware, senior vice-president of Dell Americas, Joe Marengi, said.

Senior vice-president of business development for Seton Health Care, Tom Gallagher, was one of those customers that brought Dell services personnel into its IT department to completely manage that department. As a non-profit health-care provider in Central Texas, Seton did not have the resources to attract the top IT talent in the area but needed to revamp its IT department in order to take advantage of new mobile technologies, he said.

Another Dell hardware customer, the University of Buffalo, worked closely with Dell's high-performance computing team during the installation and setup of new Dell servers, director of the university's Center for Computational Research, Russ Miller, said.

The university didn't need Dell's help managing its network of servers, but it appreciated the network design capabilities that Dell could offer the organisation, he said.

However, this strategy of offering limited services relied on Dell staying on top of hardware trends, Miller said.

He and his team have had several conversations with Dell about the benefits of servers based on Advanced Micro Devices's Opteron processor, which Dell does not offer.

The University of Buffalo did work with other hardware partners, such as Silicon Graphics for multiprocessor Itanium servers, but enjoyed its relationship with Dell, Miller said.

In order to maintain that relationship, Dell executives and services personnel would need to continue to listen closely to customer input on emerging technologies, he said.

The company had to make business decisions about issues such as its ongoing flirtation with Opteron servers, but customers would also make decisions about the best hardware for their environments, which may or may not involve Dell hardware, Miller said.

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Tom Krazit

IDG News Service
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