Dell president happy with cautious path

COMPUTERS: As far as Dell president and chief executive Mr Kevin Rollins is concerned, Europe isn't all that different from the United States when it comes to selling computers.

"We have a model that's proven in a very tough market, which is in the US. We're not going to change anything or do something new, we just need to continue to execute," he said in an interview with The Irish Times.

The Dell model is a byword for success in the volatile information and communications technology sector, particularly in the painfully competitive computer hardware market. Margins are slim, so Dell manufactures to order, building and shipping with almost no warehousing time, markets aggressively, and rushes to get the newest features into its boxes to coincide with the moment consumers and businesses begin to ask for them.

So far, its managed to stay on the crest of the wave, reporting market growth and profits when many competitors are getting pummelled. It is number one in the global market, sparring continually for the lead position with the much bigger product and services empire of IBM, as well as industry heavyweights Compaq and Hewlett-Packard.

In the Republic, the company has a larger per capita slice of the computer market - 35 per cent - than in the US. Most people think of the company as a consumer computer manufacturer but the consumer market is tiny for Dell, only 15 per cent of its business and less than 55 per cent of total revenue. The "sweet spot", as the industry likes to say, is the enterprise - medium to large businesses that want desktop machines and the more costly and profitable powerful computers known as servers, together with software and services to manage them.

The company made new product and services announcements in this area this week, marking out territory in the middle range of the server sector - preferring to leave the very high end to other competitors.

"Mid-range is still doing quite well. It has a lot of upsides and, frankly, allows us to attack Compaq as well," said Mr Rollins.

Dell clearly hopes to take advantage of customer uncertainty as rivals Compaq and Hewlett-Packard merge - especially as it looks as if a lawsuit by board member Mr David Hewlett will threaten to delay the marriage.

Recent rises in memory price, and a consequent decision last week by Dell to hike the prices of its systems, may threaten to squeeze profits. But Mr Rollins argues that the price change of $20 (€23) to $30 or so, while significant in a desktop system, is inconsequential to enterprise customers laying out $3,000 on a server.

He also said Dell's increased focus on the enterprise will be of benefit to the Republic, bringing higher end manufacturing jobs for more complex products to its design and build facilities in Limerick.

Nonetheless, he notes that the State needs to remain on its toes to continue to attract technology companies, especially with rising labour costs. "India and China are significantly lower," he said. But he noted that the Republic has the right kind of employee and logistics benefits for the company - it is a good base from which to ship to Europe. Dell intends to keep its operations in the State, he said.

He predicts a gradual turnaround in the global economy, starting in the US over the coming quarters and then spreading to Europe. "We have not yet seen a big uptick in IT spend," he said.

Dell is proceeding cautiously, he said. "We're fairly conservative on what we think is going to happen, and so we run our business accordingly."