No. 15: Charging back to the front

Dell reorganizes to add services and beat back the competition

Dell Inc.

Top 100 revenue: $1.7 billion

2007 revenue: $57.4 billion

2007 net earnings: $9.5 billion

2006 revenue: $55.9 billion

2006 net earnings: $3.6 billion

Employees: 82,700

http://www.dell.com

Dell Inc. had a challenging year in 2007 as
it made several strategic moves to beat back
the competition by adding service-provider
capabilities to its offerings as a computer
manufacturer. Although in a transition period,
Dell recorded $1.7 billion in government
sales and secured the No. 15 spot on this
year's Top 100 rankings.

To bolster its services capabilities, Dell
made several acquisitions, including ASAP
Software Inc., of Buffalo Grove, Ill., a
provider of software solutions and licensing
services. The computer giant also purchased
EqualLogic, a Nashua, N.H., provider of
high-performance storage-area network
solutions.

Companies are bundling hardware and
software with services because customers want
efficiencies, said John Enck, research vice president
at Gartner Inc. "Dell
has recognized that in order
to be competitive in the
market going forward,
they've got to really reinvest
in solutions. That's why
they made a lot of the
acquisitions."

In another move,
Chairman Michael Dell
returned for a second stint
as chief executive officer to lead the reorganization
and stem Dell's year-long loss of market
share to rival Hewlett-Packard Co.

Despite the challenge from HP, Dell
remains the No. 1 provider of PCs to the government,
said Shawn McCarthy, research
director of government infrastructure optimization
and vendor programs at
Government Insight, a division of IDC.
He said their competition often comes
down to price and availability.

"Sometimes availability can be an
issue when you're talking about hundreds
or thousands of PCs," McCarthy
said.

In another strategic move, Jim Duffey
joined Dell in December as vice president
and general manager of the Public
Business Group, which includes the federal,
state and local, education and
health care sectors. He left EDS Corp.
where he had led that Top 100 company's
government services business.

Within three months of his joining
Dell, the government group was
restructured.

The federal sector now focuses on
providing the homeland security and
intelligence agencies
with laptop and desktop
PCs, servers, and storage,
Duffey said. Other
groups are devoted to the
civilian agencies; Defense
Department; systems integration;
state, local and
education; and health care
markets.

Although it's too early to
tell how well the new alignment is working,
Duffey said, "indications are they will have
accomplished more in covering the marketplace
than was covered before."

"Customers are grappling with the challenge
of trying to do a lot more with less: less money
in their budgets and fewer people," Duffey said.
He said that as a manager, his challenge is
to ensure that his sales teams find new customers
and markets and are adept at selling
Dell's new products. "I think that opening up
the organization in this way has allowed us to
accomplish that."

Duffey said he couldn't say how active Dell
would be in the mergers-and-acquisitions
marketplace this year, adding that he has
seen indications the company is not looking
for major acquisitions. But he wouldn't rule
out smaller niche buys.

"It's clear that the senior leadership is targeting
niche areas where we can expand our
footprint around the products that Dell has
historically provided," he said.

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