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Dell sees growth in printers

Dell that seven years ago became the No 1 in US hopes to do the same in India, China, Eastern Europe and Russia.

india Updated: Apr 11, 2006 11:22 IST

Dell Inc, the computer maker that stumbled last year with slower-than-forecast growth, says its rapid expansion will resume as it seizes opportunities and in emerging markets.

The company that seven years ago used its direct-sales business model to capture the No 1 spot among US computer makers hopes to do the same in India, China, Eastern Europe and Russia.

"If we had the same geographic market share outside the US as we have in the US, our company would be twice as big," Ro Parra, senior vice president for Dell's Americas business, said in a recent interview at the company's headquarters in Round Rock, Texas.

"The geographic focus to further growth is very important to us," added Parra.

Chief Executive Kevin Rollins told Reuters on Wednesday the company could reach $100 billion in annual revenue from $55.9 billion last year if it continues on its current growth path. He declined to say when the company could reach that goal.

Rollins, 53, said Dell can expand outside the United States by first targeting large, multinational companies with which it already has relationships, followed by domestic businesses, government agencies, small businesses and finally consumers.

"It's essentially the same way we've done it in every country in the world," he said.

But that approach may be easier said than done, said Roger Kay, president of the research firm Endpoint Technologies Associates.

"They actually face challenges in the developing world that they never faced before," Kay said. "In other markets, you have a low level of business trust" that leads people to prefer buying computers from retailers, usually with cash. "That kind of environment disadvantages the direct business model."

Dell last year twice lowered revenue forecasts, disappointing some investors, who were accustomed to double-digit percentage growth as the company trumped competitors like Hewlett-Packard Co. and Gateway Inc.

Dell, begun by Michael Dell in his dorm room at the University of Texas at Austin in 1984, grew in 20 years to become the world's No 1 personal computer maker by selling directly to customers on the phone and over the Internet, thereby circumventing retailers and undercutting competitors' prices.

But the company cut prices on entry-level consumer computers too aggressively last year, slowing sales growth. Now, it is looking at new products and services and emerging markets to revive the brisk acceleration for which it became known.

Sales in Brazil, for example, almost doubled in Dell's 2006 fiscal year ended Feb 3, Parra said. Michael Dell, 41, last month announced plans to double the company's Indian staff to about 20,000 in the next three years.

Dell also added a second plant in Xiamen, China, doubling capacity in the world's fastest-growing economy and helping boost computer shipments there by 37 per cent. China now is Dell's fourth-largest market outside the United States.

Those efforts contributed to a 21 per cent surge in revenue in the Asia-Pacific region last year, pushing the region's share of Dell's total revenue to 12 percent. Dell's revenue outside the United States reached 43 per cent of the total last year.

Meanwhile, Dell has high hopes for myriad new product initiatives, including pushing its three-year-old printer business.

"The value proposition for customers is easy," Parra said. "If you're using a Dell printer and you're about to run out of ink, with three clicks you can order the print cartridge you need."

But Dell faces tough competition from HP, which is the biggest printer maker.

"HP offers more value and convenience than Dell when purchasing printer supplies, and potentially many more products," wrote Moors & Cabot Capital Markets analyst Cindy Shaw, who has a "hold" rating on Dell stock and a "buy" on HP in an April 7 note to clients.

First Published: Apr 10, 2006 11:33 IST