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Much ado about Dell
Dell downplayed the significance of its consumer push Friday. Corporate spending is still the key.
September 26, 2003: 1:04 PM EDT
By Paul R. La Monica, CNN/Money Senior Writer

NEW YORK (CNN/Money) - There was a lot of hoopla about Dell's big move into the consumer electronics arena Thursday, but the company seemed to downplay the hype on Friday.

Speaking at the Shop.Org online retail conference in New York, CEO Michael Dell said that MP3 players, online music and flat-panel televisions are complementary businesses to that of selling personal computers, and their introduction is not a sign that Dell is shifting its strategy.

"People talk about the death of the PC, but the last time I checked, most people get on the Internet with a PC," Dell said.

Dell went on to say that even though it is the market-share leader in the personal computer business, he still sees room for growth in this area, particularly on the laptop side, as more consumers and businesses move to wireless notebooks.

"There are still opportunities to grow in desktop and mobile computing," said Dell. "To say we are going straight into the television market is a bit of an exaggeration. Computing is the core of our business."

And in an interview after Dell's speech, Michael Farello, Dell's vice president of corporate marketing, pointed out that more than 80 percent of Dell's annual revenue comes from sales of PCs, servers and other hardware to businesses, not the average consumer.

Even with the new consumer products, Farello said Dell's consumer business should continue to generate about 15 percent to 18 percent of total sales. "Will the consumer business grow substantially larger? It's hard to envision," Farello said.

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Still, consumer spending on technology has not taken as big of a hit as business spending has during the past few years. So it made sense for Dell (DELL: Research, Estimates) to make a larger foray in this market as well.

Bill Fearnley, Jr., an analyst with FTN Midwest Research, said Dell's consumer electronics push was not a major surprise since other PC manufacturers Hewlett-Packard (HPQ: Research, Estimates), Gateway (GTW: Research, Estimates) and Apple (AAPL: Research, Estimates) have already made similar moves to expand their consumer offerings. Fearnley does not own the stock and his firm has no investment banking ties with the company.

Apple, after all, has had a huge hit with its iPod music player and iTunes music store. And Hewlett-Packard recently announced more than 150 new consumer products, most of them in the printing and digital imaging market.

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Fearnley said he expects Dell to gain a decent amount of market share in a relatively quick amount of time, which is what the company is known for doing when entering markets. Because of its low cost structure and direct sales model (i.e., selling everything over the phone or on the Web as opposed to through retailers), Fearnley said Dell would probably be fairly aggressive in pricing.

The company has yet to announce prices for any of its new consumer products, however.

Still, for investors in Dell, or for that matter HP and other hardware companies, it appears that the key to success still lies with the business market. And Farello said Dell is not ready to declare a recovery, despite some more cautiously optimistic comments from companies such as Cisco Systems, EMC and Intel as of late.

"We continue to expect fairly modest growth," said Farello. "The notion of a large recovery or significant uptick in corporate spending is one we're not planning on yet."  Top of page




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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.