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Is Dell's growth sustainable?

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Dell,
Rollins

John G. Spooner CNET News

Published: 02 Nov 2004 14:49 GMT

When it comes to pushing the right buttons, Dell CEO Kevin Rollins arguably has racked up the best record of any computer executive this side of Steve Jobs.

The former Bain management consultant, who came on board at Dell in 1996, received kudos for the way he handled day-to-day operations at the technology maker even before his appointment as CEO in July.

Under his stewardship, Dell has racked up impressive growth records. It raced past rival Hewlett-Packard even after the company consumed Compaq to become the world's largest supplier of PCs.

His Midas touch has extended beyond personal computers and servers to printers -- a fledgling business that is in the black after only a few quarters of operation.

But Rollins will be hard-pressed to maintain Dell's winning streak as the company continues to diversify its business. For instance, Rollins wants to drive prices of big-screen digital televisions down to under $1,000, which would bring Dell into fiercer competition with consumer electronics giants such as Sony and Samsung. He admits most of that equation is out of Dell's hands and rests instead with screen makers.

Also, Dell's growth may be eventually hindered by a relatively limited talent pool. It's a concern that gives Rollins pause. Still, there are a few more future opportunities for Dell that Rollins has his eye on, including digital cameras and smart phones. ZDNet UK sister site CNET News.com editors and reporters recently visited Rollins at Dell's Round Rock, Texas, headquarters to learn more about what's on his mind these days.

Q: What's the outlook for Dell's business?
A: The outlook for the PC industry does not really describe our business as well as it used to. But for the PC business at large, which is still the core of what we do... we are seeing good, constant growth, quarter after quarter, as corporations once again start to buy.

And your consumer business?
The consumer products piece is kind of a second-tier activity. It's sexy to talk about, but doesn't generate a lot of revenue and profits for the company. So financially and strategically, we think about it in a different bucket than we do the other pieces of the business.

Will that ever change?
I don't think it will, for a couple of reasons. If you look at all of the very best consumer electronics companies on the planet, they are all doing terrible. They don't make any money. The only kind of recent successful new product in that category is the iPod, and no one else has been able to match that. So the industry is fundamentally challenged.

Secondly, you are seeing a new wave of consumer electronics that are taking on PC componentry. That's suggesting we are going from a proprietary realm towards PC componentry, which is going to put a real strain on all of those companies. It looks like a tough darn place to make a lot of money.

So why does Dell bother with consumer electronics products?
Because we're in the PC business. So for us, [consumer electronics] looks like a wonderful place. We buy the most flat-panel monitors on the planet, so adding a tuner -- which is not very expensive -- and building flat-panel [television] products is a natural product extension for us.