Dell Targets Corporations With New System

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Aiming to accelerate its already speedy ascent to the pinnacle of the PC industry, Dell Computer Corp. last week unveiled a data-storage system targeting large corporations.

"This has a huge market potential, which looks to be in the next three to four years more than a $30 billion market. So we consider that a huge blue sky," Tom Meredith, chief financial officer at Dell, Round Rock, TX, said during a conference call with analysts. "It's an opportunity for us to play in the enterprise market, specifically in the storage arena. We think the margin opportunity and the profit pool is massive largely [because of] a few players raking in unnecessary cream. We are going to lower that level and we will be aggressive in doing it."

Meredith cited solid growth across all geographic markets during the conference call, but admitted that Dell is aiming to boost the amount of servers it sells. Dell's goal is to sell one server for every 17 desktops, slashing in half its current ratio of one to 33.

Although both Compaq and Hewlett Packard tout a ratio of one server to 17 desktops, Meredith denied that the indirect channel is helping the two computer companies sell more servers.

"In the workstation business, for instance, we lagged in introducing a family of products by almost one full year. Our biggest competitor and the No. 1 player in the NT-based workstation market was Compaq," he said. "We overtook them as the No. 1 player in roughly less than nine months, so we think that channel shift will be accelerating. Just as we saw some of the naysayers in the past recognize that conventional wisdom was flawed as it related to selling desktops and notebooks, we see no evidence at present that would suggest it's appropriate to think indirect is preferred as a channel of distribution in the higher end."

In fact, Meredith said, Dell predicts that its direct method of distribution will bolster its already robust earnings.

"We have a very healthy environment and we are very well positioned. Companies that are like Dell are also well positioned," he said. "Companies do have to price in line with the cost structure if they want to make money, and we have the lowest cost structure. We have more opportunity ahead of us than we have seen to date. We continue to be pleased with where we find ourselves."

Dell also recently announced new servers, service programs required to link and maintain corporate networks and global alliances with service companies Wang Global and Unisys to provide customers with additional support.

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