Dell to focus on services expansion as demand recovers

HONG KONG (Reuters) - Dell Inc, the world’s No.2 PC maker, will focus its M&A activity on expanding IT services in specific markets as it diversifies beyond its core PC business, a senior executive said on Thursday.

A man wipes the logo of the Dell IT firm at the CeBIT exhibition centre in Hannover February 28, 2010. REUTERS/Thomas Peter

The company would not concentrate on making huge acquisitions in the near future, Steve Schuckenbrock, global president for Dell’s large enterprise business, told a news conference.

“Services expansion on a geographic basis is a priority,” he said. “China is high on that list.”

Schuckenbrock’s comments come after Dell engaged in a bidding war with rival Hewlett-Packard Co for high-end storage maker 3PAR, with HP ultimately winning the $2.4 billion battle.

Dell announced it would buy cloud-computing services company Boomi earlier this week to shore up its ability to provide software over computer networks, in a move it says will help smooth data transfers between programs.

Dell also aimed to have its services unit in China contribute up to 25 percent of its revenue there in three years, up from about 10 percent now, said its China Vice-President Alex Yung.

PC companies have increasingly been looking to mobile devices and IT services to diversify away from the heavily commoditized personal computer, where net margins can fall to the low single digits for companies such as Acer Inc.

Demand for Dell’s services was also returning to pre-crisis levels as companies look to perform system upgrades that were put off in the past two years, Schuckenbrock said.

“I think a lot of spend we see today is a ‘spend to save’ mindset,” he said. “That is a substantial driver of the growth we’re seeing. It started in the third quarter of last year and I still see it at this point.”

Dell and Lenovo Group Ltd, which are heavily reliant on corporate spending, were harder hit during the crisis as companies squeezed their technology budgets.

Reporting by Doug Young and Kelvin Soh; Editing by Chris Lewis