Dell to increase profit margin through big business deals and new ventures

Despite a healthy 15 percent year-on-year growth of earnings after the third quarter, to $545 million, and a revenue spike of 22 percent, to $15.5 billion, the company seeks new side ventures to increase its profits, shows an USA Today analysis. Dell’s gross profit margin contracted to 16.6 percent compared to 18.7 percent a year before.

The recent bidding war between Dell and Hewlett-Packard over data storage company 3Par Inc showed a tendency of computer makers expanding their businesses to more profitable sectors, such as data storage services and network development. The interest showed by Dell in this relatively unknown data storage company also reflects, analysts say, the transformation of the PC giant into a solutions provider. Since 2006, Dell has acquired a dozen companies, compared to only two in the previous two decades.

For Dell, this is part of a massive renewal strategy initiated last year, which aims at energizing company revenues for several quarters, according to market analysts.

The pursuit of such acquisitions, while not exclusive to Dell, shows that big providers want to serve big businesses. The company does not intend to go low on its core PC-selling business to medium-sized as well as bigger companies and individual consumers, which accounts for more than half of Dell’s sales. However, it also plans to focus on contracts with large businesses worldwide of more than 500 employees, government agencies, nonprofit organizations, and educational institutions.

Currently, 21 out of the world’s 25 largest websites are powered by Dell technologies, including Facebook and Microsoft, who use custom servers put in place by Dell’s 3-year old Data Center Solutions.

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