Computer
“It would be very low on our list of opportunities,” Chief Financial Officer Brian Gladden said in an interview yesterday.
Dell will continue to focus on shoring up profit instead of chasing PC market share, even if it means losing the No. 2 ranking in the PC market, Gladden said. No. 3-ranked Acer, which is benefiting from demand for low-cost, scaled-down notebooks known as netbooks, may pass Dell in unit shipments, he said.
“That doesnt bother me at all,” Gladden said after meeting with financial analysts in Austin, Texas. “Selling netbooks that have zero margin, Im not excited about. Wed rather make more money than be the largest unit seller.”
Chief Executive Officer Michael Dell said yesterday his company plans to pursue a “portfolio of acquisitions” to help boost sales amid a global economic slump. Dell will consider buying companies that help expand its PC, server, storage and services businesses, as well as technology providers that push it into new markets, Gladden said.
Systems Management
Stella Chou, a spokeswoman for Taipei-based Acer, didnt immediately return an e-mail seeking comment.
Dell, based in Round Rock, Texas, is looking at makers of systems-management software, which is used to run computers and in corporate data centers, Gladden said. “Wed probably buy that business and run it as a separate product development organization,” he said. “That would be generally a lower-risk integration strategy for us.”
So far, Dells biggest transaction was the $1.4 billion takeover of storage technology maker EqualLogic Inc. Gladden said the 2007 purchase helped Dell boost margins and reduce reliance on PCs, which account for about 60 percent of revenue.
Dell is looking at deals that would carry a price tag of $200 million to $8 billion, Gladden said. He declined to name specific targets, saying the list includes a “broad set of assets that wouldnt surprise anybody.”
“If we can go buy 10 more EqualLogics for $1.5 billion each, and execute as well as we did on that one, it will change the whole company,” Gladden said. “If we go buy one $9 billion asset, thats one set of risks. If we go buy several smaller ones, you probably have a better chance of being successful.”
Dell rose 13 cents to $12.10 at 1:17 p.m. New York time in Nasdaq Stock Market trading. The shares had gained 17 percent this year before today.
UBS AG said last month that Dell should buy a software maker or computer services company. In the services market, targets include Computer Sciences Corp. and Affiliated Computer Services Inc., UBS said in a June 17 report. Software targets could include Salesforce.com Inc., McAfee Inc., Citrix Systems Inc. and CommVault Systems Inc., the firm said.
“Dells preference is likely smaller size deals that would allow accretion in a shorter time frame with less integration,” Maynard Um, a UBS analyst in New York, said in a report today. He rates the shares “neutral.” “Services and software are the likely areas of focus for Dell.”
Dell climbed to the No. 1 spot in the PC market by selling computers directly over the phone and Internet, offering machines at lower prices than other PC makers. That strategy worked until 2006, when Hewlett-Packard Co. cut prices and leaned on its network of retailers to woo consumers looking to buy notebook PCs. Shoppers wanted to touch the computers rather than buy them from Dell over the Internet, a shift that allowed Palo Alto, California-based Hewlett-Packard to reclaim the PC market lead.
Netbook Demand
An acquisition of Acer could help expand Dells sales by giving it more access to international customers, Toni Sacconaghi, an analyst with Sanford C. Bernstein & Co. said in May. Acer has capitalized on consumer demand for netbooks, which typically sell for less than $500. The netbook market will expand to 126 million units in 2015 from 12.5 million in 2008, Piper Jaffray & Co. estimates.
While Dell offers netbooks, Michael Dell said yesterday hes not interested in a unit shipment fight with Acer because the low-priced machines “are generally not a good place to go after profit.”
Profit Share