Michael Dell hints at more, bigger acquisitions

Company shopping for more takeover targets?

Dell CEO Michael Dell hinted that his company could be shopping for more acquisition targets, and that they could be larger than the companies it has acquired to date.

Speaking in Tokyo, Dell made the comments after giving his views on a recent run of acquisitions in the PC market, such as the purchase of Gateway by Taiwan's Acer.

"I think the pace of consolidation will increase," he said. "It think that it favors the larger companies, particularly as the growth is skewed towards emerging countries. In the last two years Dell has acquired five companies, two related to the consumer business, one related to software and two related to services. These have all been relatively small companies but I would not be surprised if the nature and pace of acquisitions increases somewhat."

He added that his company had looked at Gateway when it was available but decided against purchasing the company.

Dell was in Tokyo to launch the company's "simplify IT" program. It aims to cut corporate IT management costs, thus freeing up spending for use on new computers and servers. He estimated that 70 percent of IT spending at Japanese companies over the next year will be related to maintenance of old systems and management and only 30 percent on new hardware.

"We need to flip that 70/30," he said.

On the consumer side of Dell's business the company has recently begun offering PCs through retailers -- a break with its successful direct sales model. With a handful of retailers already selling its systems, Dell said more are on the way.

"The first steps that we have taken with the partners mentioned earlier are really just that, first steps," he said. "So I think you can expect over the next several quarters or year or two, that in all major countries around the world like Japan, Korea, China, India, U.S., France, U.K., Russia, etc., you would see Dell having a small number of key partnerships which allow consumers to purchase Dell products at retail. It's really about making our products available in more places."

"I believe we can grow the direct business both on telephone and online and I believe we can grow a channel, a partner business. And we are also working very hard to extend the capabilities that Dell has to our channel partners," he said.

Looking ahead, Dell promised new x86-architecture based products during his speech at Oracle Open World on November 14. The products, which he didn't detail, will have "breakthrough performance and power capability relative to others in the industry.

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Martyn Williams

IDG News Service
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