• 4toner4
  • 7035-overstock-banner-902x177
  • 05 02 2016 429716a-cig-clearchoice-banner-902x177
  • 2toner1-2
  • mse-big-banner-new-03-17-2016-416716a-tonernews-web-banner-mse-212
  • mse-big-new-banner-03-17-2016-416616a-tonernews-web-banner-mse-114
  • big-banner-ad_2-sean
  • Video and Film
  • cartridgewebsite-com-big-banner-02-09-07-2016
  • Print


 user 2005-05-27 at 12:42:00 pm Views: 39
  • #9370

    Dell: Sure, we’ve got PCs, but try the printers

    A casual observer of the IT industry who stumbled upon Dell’s
    analyst meeting in Austin, Texas, last week while looking for a blues bar on
    Sixth Street might have emerged from the ballroom of The Four Seasons Hotel
    slightly confused about the nature of the company.

    The worldwide leader in PC market share spent very little
    time talking to financial analysts about its performance in the core business
    that accounted for about two-thirds of its revenue during its last fiscal year.

    In fact, after a question-and-answer session with Chief
    Executive Officer Kevin Rollins, company spokesman T.R. Reid informed
    journalists that reporters had an “obligation” to focus on the other parts of
    Dell’s business that were outlined during the two-day event, such as printing
    and services. While that exhortation prompted some curious looks, Dell’s message
    was clearly designed to reassure the financial community that even if the PC
    market stagnates, Dell will continue to exceed expectations for quarterly
    growth, analysts said Friday.

    Over the past few years, the company has delighted the
    financial community by improving revenue and net income by about 20 percent each
    quarter, compared to the previous year’s quarter. With PC shipment growth
    expected to slow to 8 or 9 percent over the next two years, and revenue growth
    in the category expected to be even weaker, Wall Street analysts are concerned
    that Dell is about to hit the inevitable slowdown in growth that befalls mature

    To dispel that notion, Dell executives pointed to several
    different markets that will allow the company to increase its yearly revenue to
    US$80 billion by 2008 or 2009. The company recorded $49.2 billion in yearly
    revenue during its fiscal year 2005, which ended Jan. 28, and expects to post
    around $60 billion in revenue during the current fiscal year.

    For example, Dell cited the printing and imaging market,
    which the company thinks will be worth $105 billion in 2005. But Dell did not
    discuss how closely shipments of printers are tied to shipments of PCs, said
    Stephen Baker, director of industry analysis with NPD Techworld. Dell often
    gives away free printers with purchases of Dimension desktop systems, or
    discounts laser printers for business customers of Dell’s PCs, he said.

    This makes sense, because the revenue stream generated by
    replacement ink or toner cartridges for the printer quickly offsets the cost of
    giving away the printer, Baker said. But the PC business is what drives that
    revenue stream, not the printer itself, he said.

    With slower PC growth expected this year, Dell might have
    been trying to soften the upcoming blow of relatively poor market share results
    during the current quarter, said Roger Kay, vice president of client computing
    for IDC.

    Over the last few years, Dell has made significant gains in
    PC market share at Hewlett-Packard’s expense during the year’s first quarter,
    while HP chipped away at that advantage over the remainder of the year, Kay
    said. Although Dell reaffirmed its guidance for the first quarter, Rollins said
    the PC business had been a little weaker than the company had expected.

    If the company doesn’t post as strong a gain during the first
    quarter, it might not be able to increase PC market share over HP this year and
    therefore it would only be able to grow as fast as the entire market, Kay said.
    IDC and Gartner will report their PC market share estimates in two weeks.

    The financial community tends to overreact to bad news, Kay
    said. Should Dell fail to post those market share gains, the company could point
    to its messages during the past week and remind analysts that the fluctuations
    of the PC market will have less of an effect on Dell’s overall business going
    forward, he said.

    Dell is at a turning point in its history, Kay said. Dell
    executives and public relations personnel are trying to manage the company’s
    transition from a U.S. PC vendor to a global enterprise IT vendor with the
    breadth of its rivals, like HP and IBM, he said.

    “They’ve been saying this message for a long time, but
    they’ve cranked it up,” Kay said.

    Dell believes it is in the best financial shape of its life,
    and few analysts think the company would set a target for $80 billion in yearly
    revenue if it wasn’t very confident in its plan for reaching that goal. But
    financial analysts plan to wait and see if Dell can pull off this transition
    without significant contributions from its PC business.

    “We think Dell can sustain about 16 percent revenue growth
    the next few years. But dependence on PCs and slowing penetration in key
    European countries must be monitored,” wrote Merrill Lynch & Co. analyst
    Steven Milunovich in a research note distributed Friday.