IBM Corp.’s plans to sell off its PC business to China’s Lenovo Group will probably bring an opportunity to nail greater sales in China, according to Jim Schneider, Dell Computer Corp.’s senior vice president and chief financial officer.
Aside from international PC sales, Schneider cited Dell’s emerging printer and consumer electronics businesses as other promising areas for the future. “Time will tell, but I think [the IBM-Lenovo deal] just gives us another opportunity,” Schneider said, speaking last week at the Raymond James IT Supply Chain Conference in New York.
The arrangement between IBM and Lenovo, which was announced last week, will create a business that analysts say will initially rank No. 3 in the world behind Dell and Hewlett-Packard Co.
Click here to read more about how the IBM-Lenovo deal looks to the competition.
But during his talk to investors, which was also broadcast over the Web, Dell’s Schneider dismissed the importance of Lenovo outside of China. He also questioned whether the merged entity will be able to maintain its initial sales clout.
Historically, many merged and acquired companies “have lost market share over time,” he told the investors, adding that he doesn’t see Lenovo playing outside of China. Lenovo “is not a pan-Asian company,” the Dell CFO said.
Meanwhile, as the PC business keeps maturing, Dell is looking at PC sales in Asia and Europe, along with its own emerging printer and TV businesses, as areas of emphasis going forward, according to Schneider.
Schneider also pointed to Dell’s “ownership of the supply chain”—from manufacturing through distribution and sales—as a major plus in the PC market. Dell’s supply chain ownership has resulted in “getting rid of the middleman,” and improved efficiency, he said. Dell has built its PC business around build-to-order just-in-time manufacturing.
Click here to read about what IBM customers think of the deal.
With regard to the IBM/Lenovo deal, Schneider gave credit to Lenovo for doing well in the Chinese consumer market. However, Dell is “selling on the higher end,” in the Chinese enterprise space. Moreover, Dell owns “big manufacturing” in China, he said.
“We’re just not much of a consumer business [in China)]” Schneider said. “[But] we’ve been profitable from the get-go there.” HP is another North America PC manufacturer that has gotten an early start in China, he said.
In some European and Asian countries, Dell’s sales are now growing at between 20 and 25 percent a year, according to Schneider. Yet countries can differ dramatically in terms of sales infrastructures and local players, he pointed out.
Schneider acknowledged that, despite continued strong growth for the company overall, Dell’s enterprise sales in North America have been “a disappointment” over the past few quarters. Dell will now try to “accelerate” this business again, he said. Through a deal on the enterprise side, Dell is now reselling EMC storage units with its enterprise systems.
Schneider said, too, that instead of merely reselling printers, as it does today, Dell might step into printer manufacturing some time over the next few years.
When asked by a moderator to rank Dell’s opportunities outside the PC arena, Schneider listed printers and television, in that order.
Dell is still “small and young” in the printer market, having entered the arena only as “a strategic necessity,” according to Schneider. So far, Dell has been more successful on the consumer side with printers, but printers hold the potential to become highly profitable for Dell down the road, he said.
Right now, Dell is splitting printer profits with its partner Lexmark, according to Schneider. Dell has also been advising Lexmark on supply chain issues. If new technologies arise in the printer industry over the next few years, Dell will consider becoming a printer manufacturer, too, the Dell CFO told the investors.
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