Dell Loses Big Philips Contract for Computer Gear and Service

Dell Inc., the world’s largest maker of personal computers, lost a $700-million contract to supply Philips Electronics with PCs and system management.

Amsterdam-based Philips, Europe’s No. 1 maker of consumer electronics, and Dell “mutually” agreed to end the contract, Philips spokesman Jayson Otke said Monday. Dell spokesman Jess Blackburn did not have an immediate comment.

The deal was part of Dell Chief Executive Kevin Rollins’ efforts to expand sales beyond PCs, Dell’s biggest moneymaker. Dell, based in Round Rock, Texas, announced the five-year contract with Philips in December 2004, saying it would supply PCs and servers to 75,000 employees in 60 countries, along with services to help manage the company’s information systems.

“Dell could still get a lot of the hardware business at Philips,” said Jeroen van Harten, an analyst at Rabo Securities in Amsterdam. Philips executives may choose to contract for PCs and services on a division-by-division basis, with some computer sales going to Dell, he said.

Service revenue grew 26% last quarter to $1.4 billion, accounting for 9% of Dell’s sales. Sales of desktop and notebook PCs totaled 62% of revenue, and servers -- computers that run corporate networks and websites -- represented 10%.

Philips is the world’s largest maker of mobile phone screens and Europe’s biggest television manufacturer.

Getronics, the largest Dutch computer services company, was a subcontractor to Dell on the deal. Getronics spokesman Dennis Doodeman said Philips ended the agreement, though he couldn’t say when or how much it was worth to Getronics. Atos Origin, a services company based in Paris, also worked on the Philips contract.

The deal was probably worth $80 million to $90 million to Getronics over its term and $30 million to Atos, said Van Harten, who rates Getronics “outperform.” The two companies may now get more service business directly from Philips, he added.