Company Special: Dell looks East for place to implement new strategy

Dell Inc is focusing on corporate clients in China now that founder and CEO Michael Dell has taken the world's third-largest PC maker private.

"China now has many of the world's largest companies setting up in the country. It's a good opportunity for IT companies to expand market share," said Dell on a recent trip to China.

The company is building capabilities well beyond PC manufacturing and is looking to develop a wider range of products and services to increase profit.

"Our business is about to understand the customers' real need and deliver the solutions that can address these demands," Dell said.

Based in Round Rock, Texas, the company has been working to transform itself into an end-to-end solutions company since the global PC market hit a record low.

Dell hinted that his company will speed expansion into products and services for corporate clients after he took the company private.

On Sept 12, shareholders approved a proposal in which Dell Inc, in partnership with investment firm Silver Lake Partners, will acquire the United States company for approximately $24.9 billion.

The transaction is expected to close this year.

The company now provides a range of IT solutions for customers with varying needs, ranging from consumers and small and medium-sized enterprises to governments and the largest enterprises of the world.

In addition to PC, its major businesses include data centers, software and services.

Since the Chinese government announced plans to upgrade traditional industries and lift productivity, the demand for services, modern infrastructure and new capabilities has grown.

"We see strong growth here in enterprise solutions and software in China. That part of the business is growing very nicely," Dell said.

China is a good place to test new customer demands, Dell said on his third trip to the country in 2013.

China is very diversified, and it is home to large cities with a full range of companies. The range of highly specialized needs that companies in China have will help Dell Inc to collect experience that it can draw on to drive future expansion in other markets.

The IT requirements of rural areas and smaller cities are similar to those of developing markets, while demands in large cities closely match those of developed markets. The situation puts China in a unique position in the global market, said Dell.

Earlier this year, the company opened a 30,000-square-meter operational base in the southwest city of Chengdu. The site will employ thousands of workers.

Chengdu shipped more than 100 billion yuan ($16.34 billion) worth of laptops, tablets and desktops last year.

PCs are still an important part of Dell Inc business, but the company also has the capacity to build data centers as well as to operate in the software and services sectors, Dell said.

Dell is selling a large number of servers to China's emerging Internet giants, including Tencent Holdings Ltd, Baidu Inc and online video provider Youku Tudou Inc.

Demand for data centers is growing, driven by rapidly growing mobile device sales.

The number of mobile Internet users in China hit 464 million this year, data from China Internet Information Center showed.

"We are a leading company providing that infrastructure to serve up all that data. When you get a mobile device, those devices actually don't have any information on them. All the information comes from a server, data center, network, storage software, etc.," Dell explained.

"It's a $20 billion business for us," he added.

Dell Inc counts among its client base 10 million SMEs and it serves 95 percent of Fortune Global 500 corporations.

In addition, China now serves as the center of Dell Inc's global business at a time when the company is striving to provide end-to-end solutions to its customers in different industries.

"Dell Inc will invest in fourth-tier to sixth-tier Chinese cities in order to reach more customers in smaller cities," said the 48-year-old, adding that his ambition constantly expands in both consumer and enterprise markets in China after the company becomes a private organization.

China became a part of Dell Inc's global market in 1998 and is already the second-largest national market for the company, which has about 9,000 employees and two manufacturing in China.

Dell believes the country's massive urbanization will drive demand in the information technology sector.

"Small cities mean tremendous opportunity for us," Dell said. "Every percentage point of shift in urbanization in China represents a population the size of New York City."

There is still much space for IT development in the country's vast rural areas and small cities, industry analysts said. The GDP per capita is expected to grow significantly in the foreseeable future and with it the ranks of the country's middle class, which means China is poised to become one of the world's largest IT product consumers, according to analysis by the industry.

Post-PC era

Dell Inc controlled about 12.2 percent of the global PC market in the second quarter of this year, data from United States research firm IDC showed. The company's performance in the PC segment was above the market average and beat out long-time rival Hewlett-Packard Co, according to the IDC.

The slump in the worldwide PC market deepened this year. According to the IDC, international PC shipments declined 11.4 percent year-on-year in the second quarter because of sluggish demand.

Dell said his company has no plans to protect the legacy of older platforms. The company is bringing modern solutions to keep the 29-year-old brand young, he said.

"Any company that is going to succeed has to evolve its capability consistently with the changing marketplace. It requires Dell Inc to know what business the company is in," he said.

Dell said its customers are looking for expertise. They want a team of experts from Dell Inc that could help them in their business.

"In petroleum markets for example, oil companies need a partner that knows energy business, knows about the challenges they are facing and can support them in every market it is operating, no matter if it is in Namibia, Nigeria or Kazakhstan."

"The No 1 challenge is how do you change the way you interact with customers and enhance the ability to be able to explain all the capabilities you have. This journey from selling products to selling expertise requires a lot of growth and new learning," Dell said.

Dell acknowledged that the company cannot become an expert of everything all of the sudden.

Becoming a company that is able to serve customers in different industries takes time. It requires investments and more staff.

Mergers and acquisitions are another way for Dell Inc to quickly enter some new areas. The company acquires six to seven companies each year in order to build its presence in some of the most-advanced areas.

"We do not go looking for companies to buy, but look inside ourselves to see what kind of experts the company needs," said Dell.

He said the company does better with large acquisitions than small ones.

"You have to spend a lot of effort in doing an acquisition well, and the cost of the effort for a small acquisition is disproportionately large relative to the value," said Dell.

"We are more successful in buying things that have some scale," he added.

Public companies with revenue of at least a couple of hundred million dollars are the ideal target for acquisition.

"Adding a capability and bringing them to larger number of customers - that works very well for us," he said.