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Dell - The Expanding Business - Fortune Online


Dude! You're Getting a Cash Register!

Dell isn't only about computers. The company is quickly diversifying
into a 'nearly-unlimited variety of products.'
Jan 14 2003
By David Kirkpatrick

Dell Computer announced this week it would start selling smart
cash registers that process debit and credit cards and manage
other electronic retail transactions. Does that surprise you? It
shouldn't. A visit to Dell's vast campus in Austin, Texas, last
week suggests we're only beginning to see how diverse this company's
products will be.

Dell is becoming something akin to the Amazon of technology, particularly for business computing.

What's different about 

Dell is that while it sells products from many companies, it puts its own brand on the most expensive stuff. That boosts profit margins.And because it sells direct it gains significant cost advantages
over competitors who sell through resellers and stores. That's
largely why its U.S. PC industry market share has jumped to a
dominant 29%.

The brand is extending further and further. Already Dell sells
its own Axim handheld PDA, and has announced it will soon start
selling Dell printers. For business customers, it offers network
switches and data storage devices. Though these tend mostly to be
at the low-end, Dell is steadily moving up. With EMC, for example,
it jointly sells very powerful enterprise storage systems.

I asked President Kevin Rollins, who jointly runs the company
with CEO Michael Dell, what was least understood about Dell. His
answer: "People have to understand the value of the model [Dell's
business model] and the sustainability of it. There is a
nearly unlimited list of products to which it could be applied."

"There are millions of industry-standard products - just march
through every consumer electronic profit pool, corporate electronics,
services. We represent in the PC space something like 14% of the
total information technology spend from corporations and individuals.
That leaves a lot of room for us to grow. You've got software and
services and many, many hardware devices -- even things like cell
phones and cameras and video recorders. It just goes on and on
and on -- projectors, new handhelds...Every day there's a new
viable product category. People sometimes say that Dell's growth
is going to start coming to an end, but there is a resilience
here that people keep missing."

The breadth of these statements surprised me, but they were
echoed when I spoke later with Joe Marenghi, who runs Dell's
business in the Americas. "Anything J&R Electronics can put in
their catalog or that Best Buy has, we could conceivably put
through here," he said. "On the corporate side it's different. If
I gave a CIO a catalog of 14,000 items they'd throw it in the
trash can. But if I talk about the 40-50 top items they buy, that
gets interesting -- from servers to storage to switches to software
to printers. It could even be paper which they buy from Staples

To get a more specific idea of what some of these brand extensions
might mean in the near-term, I spoke with John Medica, who is in
charge of all Dell's client products -- that includes PCs, notebooks
and PDAs. As we spoke, he excitedly brought in several different
wireless devices, and suggested that even as Dell could sell more
types of handhelds, it could also begin to sell the wireless
services that work with them. "Kevin talks about 'adjacencies,'"
he said. "These are natural extensions that add to the portfolio
to help us drive revenue and growth."

In some cases this will probably mean a Dell-branded service from
which it gets an ongoing revenue stream. Said Medica: "The Dell
business model certainly is well-positioned to provide activated
and registered customers for a variety of different types of
services, over time. With our number one market share in notebooks,
we're a pretty attractive partner for service providers."

Could other industries start to see the brutal price-cutting and
Dell market share gains we've seen in PCs? I wouldn't rule it
out. Nor would I be surprised to see the company eventually take
the word "computer" out of its name. It's already almost gone
from their website. This company is about much more than computers.

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Last update: 15/01/2003; 7:07:36 AM.