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Dell Sees Service, Games As Keys

Dell Computers CEO Kevin Rollins defended his company’s direct-to-consumer selling model and said he is confident that the steps Dell has taken during the past few months will get the PC maker back on track.

Rollins, who made these comments during the Bear Stearns 2006 Technology conference, held here recently, said Dell’s recent doldrums are growing pains caused by massive growth, going from $30 billion to $60 billion in sales, and numerous new categories that it has launched during the past five years. “We are upbeat that the track record we have is indicative of the company’s future,” he said.

As part of the recovery effort, Dell will continue being aggressive with PC pricing, and the company will grow its flat-panel TV business but not jump into any new CE categories at this time.

“The flat-panel monitor area is a great business for Dell, so we got into TV and have grown it in a responsible way,” he said, adding that Dell does not want to simply “harvest” revenue from its TV line in a fashion that would damage the overall business.

While Rollins did not put forth any specific price structures that Dell would follow, he did say the current market environment presents an opportunity for Dell to accelerate its price aggressiveness, but in a manner allowing the company to retain its current level of profitability. As has been previously stated by company executives, Rollins reiterated that most of the PC growth is expected to take place outside the United States, and he was particularly upbeat about Dell’s entry into the Indian market, where the company will become the first major direct seller of PCs on the subcontinent.

The one potential domestic growth area for Dell is on the gaming front. Rollins said Dell is pressing ahead here with the expansion of its XPS high-end systems and through the recent acquisition of Alienware. Rollins said the purchase was not a sign that Dell was becoming more acquisitive. Instead snapping up Alienware was described as more of a marketing move because of Alienware’s strong reputation among gaming enthusiasts.

“Between XPS and Alienware we have cordoned off a large portion of the gaming area for Dell,” he said.

Alienware will continue to operate as a separate entity from Dell, but it can take advantage of certain synergies with its parent company, Rollins said.

The impact of Microsoft’s delay in shipping the new Vista operating system is still unknown at this point, Rollins admitted. He predicted a sales lag created by people willing to put off making a PC purchase until the OS is ready, but he thought an upgrade path could be created for systems sold prior to Vista’s new ship date.

The area that has probably required and garnered the most attention at Dell is customer support, Rollins commented.

“We are investing in service and support to regain this area. We have invested $100 million here and we never want to lose this area again,” he said.

This initiative includes the just announced Dell Connect program that will allow Dell techs to gain remote control over a consumer’s PC in order to quickly and properly fix the device. Originally this program, which was announced under a different name in October 2005, was intended only for XPS customers, but Dell decided to expand it into its main product lines.