Dell CEO Sees Continued Growth in PCs
Dell Computer Corp. Chief Executive Michael Dell predicted Tuesday that the personal computer business will continue growing at about 14% annually for at least the next several years as other countries increase technology spending and access to broadband communications spreads.
Dismissing the argument that new versions of telephones, televisions and other appliances will make personal computers obsolete, Dell said most of those alternative devices still rely on home or office computers as centers of information or power.
The new devices “will addict you to information even more than you were before,” Dell said. “When the world gets broadband, everybody gets faster PCs.”
Dell said the company he founded, whose annual growth has slowed from more than 50% to slightly higher than 40% in the last six months, can increase its annual revenue by as much as $40 billion within the next few years from $26 billion now. The gains will come from increasing its share of the consumer market, from developing more higher-end products for large companies, from increasing its service offerings and from overseas, he said.
Dell Computer was one of the best-performing stocks in the U.S. for several years until this one, when it slid from a split-adjusted high of about $50 in January as the pace of revenue increases slowed. On Tuesday, Dell closed down $1.38 at $37.56 on Nasdaq.
Dell is the largest direct seller of computers to companies and individuals, eschewing retail stores entirely. It now emphasizes sales over the Internet.
The company has also been gaining market share at the expense of Compaq, the largest PC company, which recently announced another restructuring as it continues trying to digest Digital Equipment Corp., which it purchased last year.
Dell said upcoming moves to press the company’s advantage include adding auctions for computers to its e-commerce offerings, acting as an Internet service provider for computer buyers and pushing pay-per-month and other financing plans.
Dell’s average prices per sale are higher than those of its competitors. Traditionally, its main customers have been businesses, but it recently began offering a consumer model priced at $899. Dell said prices will continue to fall in tandem with drops in the costs for memory and other components but that they will rebound as Asian companies attempt to recoup their investments in factories that make those parts.
In the first quarter, Dell said, his company accounted for about 12% of the total revenue in the computer industry and 55% of its profit.
Dell’s upbeat comments to reporters were echoed by other companies at New York’s annual PC Expo convention for large buyers of computers in New York.
Hewlett-Packard said it has largely escaped the inherent inefficiencies of selling computers through retail outlets, a problem that crippled Compaq in part by bloating inventory, which rapidly drops in value.
“We’re having absolutely a great year,” said Tom Anderson, product marketing manager for HP’s Pavilion line of home desktop computers. Anderson agreed that more people will begin buying online, a trend that favors Dell’s direct-sales model.
