Dell plans to 'refresh' its IT offering with new acquisitions

THE alleged financial irregularities that engulfed computer giant Dell four years ago have not stopped the company's search for growth. One of its senior figures was in Scotland last week revealing plans to seek out more acquisitions.

Steve Felice, right-hand man to Michael Dell, the founder, chairman and chief executive of the company, outlined details of the strategy during the visit last week.

As president, Felice heads a newly created consumer, small and medium business division that operates in 180 countries and generates half of Dell's $25 billion (17bn) revenue, equal in size to that of fast food chain McDonald's. Along with bolt-on acquisitions, Dell has reorganised its business into four divisions: the one run by Felice plus others covering enterprise customers, the public sector and services.

Felice, who sits on Dell's executive board, told 100 members of Edinburgh Chamber of Commerce that the company needs to acquire certain types of enterprises to fill in the pieces of its tech jigsaw and "refresh" its IT offering to a global marketplace.

In November 2006, Dell bought Glasgow's ACS IT services company for an undisclosed sum, to bolster its custom application and consulting capabilities.

Felice was in Scotland the day before the UK general election, when he urged the Scottish Government to work more closely with the private sector to "act as a spur" and help small to medium sized businesses transform undoubted innovations into commercial realities.

Felice emphasised how clever use of technology can make all the difference when it comes to boosting productivity, the bottom line and often the survival of a business.

Scotland houses a Dell Centre of Excellence in Glasgow, employing 570, that has assumed a greater European, Middle East and Africa (EMEA) significance when it comes to technical sales and support to business customers. Its Edinburgh office had to close last year, reflecting a declining financial services sector due to the recession.

Felice preferred to talk business technology rather than dwell on US judicial and regulatory investigations over accounting irregularities within Dell that have dominated since September 2006.

He would not comment directly on arch-rival Hewlett-Packard's current troubles. HP is subject to scrutiny by the US Securities and Exchange Commission following allegations that it bribed Russian officials seven years ago to secure a 30 million contract, and charges are likely.

However, Felice did generalise: "We have to accept the fact that business life is much more transparent than it has ever been, where people will judge you, whether right or wrong. Above all else, responsible companies have to have as their core value an integrity and ensure that their people respect it because there is no place left to hide."

Dell relinquished its crown to HP around the time it became subject to a US regulatory authority investigation. Soon after the probe began, Michael Dell replaced Kevin Rollins as chief executive, as a one-time high share price of $50 sunk as low as $9. It now sits at around $18-$21. Several former employees may face charges in the US this year.

Felice claimed the share price does not reflect the true value of a franchise that started over 25 years ago, when its marketing and manufacturing of PCs proved revolutionary. However, tech times change and Dell now plans to build on last year's achievements which saw Dell finally turn around its fortunes with 13.4 per cent growth in the business.

So far this year, Dell has bought Kace, a systems management specialist to midsize businesses and the public sector, for an undisclosed sum and spent 2.6 billion to buy out of Perot Systems, making Dell the number one IT healthcare vendor worldwide.

Felice said that to compete it must re-engineer its supply chain and achieve a more streamlined production line to get new products to market faster, especially when it comes to embracing virtualisation and cloud computing secure solutions.

Morgan Stanley estimates that the mobile end of the marketplace is rapidly becoming twice the size of desktop internet, and that smartphones "will out-ship the global notebook and netbook market by 2010… and global PC market by 2012". But Dell claims to be answering the mobile call as it transforms itself from a build-to-order-in-a-box commodity hardware manufacturer championing direct sales to a full-service, global enterprise technology concern.

The success of Apple's new iPad has prompted other tech companies to plunge into the market for tablet computers, with Dell and HP among a growing list of those expected to introduce their own competing devices by the end of the year.

Significantly, Dell generates almost half of its overall global revenues outside the States and China, with the company accounting for 60 per cent of Chinese internet servers infrastructure.

Closer to home, Dell's EMEA division formed a strategic alliance last month with Spain's Telefonica to collaborate and develop smart mobile products and services to enhance the digital customer experience and drive information communications technologies to market.

The EMEA division is now expected to significantly contribute towards arresting Dell's declining share price, which saw UBS downgrade its shares last month, as competition gets tougher, margins narrow and retail prices come constantly under pressure.