Dell looking to grow through acquisitions

Dell executives on Tuesday said the company was looking to stimulate growth through acquisition as it moves its focus from client hardware to enterprise products.

The company is looking to shift its product portfolio to include offerings that could help improve the profitability in the near and long term, said Michael Dell, Dell's CEO, during an analyst conference in Austin, Texas. Dell pointed to its enterprise business as a high-margin area where the company could seek acquisitions. Dell's offerings in the enterprise space include servers, storage and services.

The acquisition of storage company EqualLogic in 2007 was a key test for Dell to offer products that deliver high margins, and the purchase worked out well, he said. The acquisition had an instant impact on Dell's revenue, and EqualLogic offerings fit into the company's server products as storage requirements increased. EqualLogic also offered the intellectual properties that helped Dell optimize its offerings as data centers shifted to virtualized environments, Dell said.

Driving more storage into data centers continues to be a growing opportunity, Dell said. Server virtualization will continue to grow as data infrastructures move to virtualized environments. The opportunity may drive down server purchases, but it offers the opportunity to be more of a consultant, which could generate more storage revenue. That helps Dell get a larger chunk of revenue from overall data center spending by companies.

Dell is also looking to expand in the managed services area as customers build out server and storage infrastructures. These offerings provide reasonable margins, but also help generate sales of hardware attached to services while keeping the company close to customers, said Steve Schuckenbrock, president of large enterprise at Dell, during the analyst conference.

The company has already made acquisitions in the managed services area over the last two years, including companies like Everdream, which offers on-demand software and managed services SilverBack and MessageOne.

The cloud-computing market is also a fast growing opportunity where Dell may seek acquisitions, company executives said. Dell could provide cloud services to push more hardware and storage products into server infrastructures, while building up its consulting services.

Dell is more focused on acquiring healthy companies with products that can offer quick returns, so it may not seek acquisitions in the low-margin areas like client hardware, said Brian Gladden, Dell's chief financial officer, during the conference. Client hardware makes up a majority of Dell's business, but the company wants to focus its growth and products and services that deliver profitability, he said.

The company has built up its financial reserves as it prepares to acquire companies. Dell had US$9.7 billion in cash and equivalents at the end of its fiscal first quarter of 2010 that ended on May 1. Dell saw overall revenue fall but EqualLogic storage products revenue increased 71 percent year-over-year during the first fiscal quarter.

A lot of companies have been also been attached to Dell's acquisition efforts. It has been rumored that Dell would acquire Palm to expand its presence in the mobile market. Palm would provide smartphones to Dell's portfolio of products, something Dell doesn't offer yet. Dell's mobility currently efforts revolve around netbooks and laptops, and has been rumored to be developing a smartphone for a long time, though no product has materialized yet. Palm's acquisition would also help Dell compete with Apple, which offers the popular iPhone.

Some observers also speculated that Dell would acquire Acer in order to expand its PC market share. However the acquisition wasn't considered a match as there would be product overlap, with both companies offering PCs for similar audiences.

Sprint makes business case for Palm Pre

Waltham, Mass. - Although the Palm Pre is getting a lot of attention for its value to consumers, Sprint representatives today started pushing its potential benefits to corporate users.

During Sprint's Productivity Now conference in Waltham, MA today, Sprint Vice President of Marketing Tim Donahue said the Pre's support for Microsoft Exchange ActiveSync made it more enterprise-ready than the iPhone's first iteration, which had no enterprise features. He also said that Palm was busy working on several "advanced security features" for the device that would be released sometime in the next two months that would make the device able to safely hook onto corporate IT servers.

"This device has a majority of things you'd want as a business user but it has a cool factor about it," he said. "Palm has indicated in next the 60 days you'll see continuous improvements to its enterprise capabilities. If you think about it from a timeline perspective, it's really ambitious. Most companies would wait for the next generation of the device to come out before tackling all these issues."

But although Palm is expected to launch several native software updates to improve the Pre's security features, users looking for third-party enterprise applications might have to wait a little longer than originally expected. Palm said today that it is delaying the release of its webOS software development kit until the end of the summer, meaning that third-party developers won't have the ability to create new applications for the Pre for at least the next couple of months. Palm's webOS was designed to make developing applications for the operating system simple, as it is based on familiar Web standards such as CSS, XHTML and Javascript. The idea behind using well-known standards, the company says, is to make it easier for applications to integrate with each other.

Of course, Sprint would contend that software updates are only one part of the Pre's appeal. Donahue said today that Sprint would provide compelling reasons for business users to buy the Pre, such as its Direct Connect push-to-talk technology and its low-cost enterprise plans. This past January, Sprint began offering business users push-to-talk services that include text messaging and picture e-mail starting at under $30 a month for each user. The company's Unlimited Workgroup

Communications offers unlimited Direct Connect push-to-talk services, along with unlimited text messaging and free night and weekend minutes for $29.99 per month. The company is also offering an enterprise voice and data plan that has all the features of its Workgroup Communications plan along with unlimited data and GPS use for $39.99 a month per user.

On the subject of the Pre's sales numbers, Donahue said that it had met or exceeded the carrier's expectations so far. The Pre's sales, which were estimated at around 50,000 during its first weekend, have so far been dwarfed by sales of the iPhone 3GS, which reportedly topped 1 million during its first weekend. Donahue says that Sprint never expected the Pre to be a magic bullet that would suddenly catapult the carrier back into the same market share as AT&T and Verizon, but that the company rather looked at it as a continued step in the right direction that would give the carrier a reputation for quality to build upon in its future offerings.

"The launch of the Pre was big for us because you need a monumental event to gain momentum," he said. "Now we have to make sure that we continue to build on it…. Nobody ever has an exclusivity agreement for the best device released on the market every year. But if you look at the last two years that hasn't happened for us, and I think what this does for us is it gives us credibility as competing at the leading edge."

Palm may have sold up to 100,000 Pres in first weekend

As many as 100,000 Palm Pre smartphones may have been sold since the device went on sale Saturday, one industry analyst estimated today.

The launch was widely considered a soft launch with a limited number of devices in stock at Sprint Nextel Inc., Best Buy and other retailers. The smartphone, described by one industry observer as an "iPhone Jr.," was highly anticipated and attracted lines of customers at stores in the first few hours of sales. The device has a price tag of $200 after a $100 mail-in rebate, plus a two-year service agreement with exclusive carrier Sprint.

Based on widespread reports of lines amid limited supply at a fairly wide range of retailers, Kevin Burden, an analyst at ABI Research Inc., said he believed that Pre sales "are where they should be." He estimated the sales to be between 50,000 and 100,000 for the first weekend.

"Did they sell 80,000 or 100,000, who knows? But it's got to be somewhere between 50,000 and 100,000," Burden said.

Palm Inc. and Sprint have not commented on sales volumes.

A surprise to many analysts and Palm fans was that the Pre was designed to synchronize with the iTunes music player from Apple Inc. Some called the move a hack by Palm of a competitor's software when the feature was announced last week.

But one prominent analyst, Ken Dulaney at Gartner Inc., said today that Palm is working with Apple on this sync capability, partly because Palm's executive chairman Jon Rubinstein once worked at Apple.

Apple would also get too much criticism if it prevented iTunes sync, Dulaney said in an e-mail. "If Apple pulled the plug after committing to it, they would probably get hugely negative publicity," Dulaney said. "They won't do that, I am betting."

Noting that Rubinstein worked for Apple, Dulaney added, "He knows them. I am sure the deal is worked out. After all, this [Pre] is the iPhone Jr."

Apple and Palm couldn't be reached to comment on the sync feature today, but Rubinstein said in a statement that iTunes sync was designed as an "easy and elegant way" for Pre users to access the music they own on iTunes.

Burden said the sync feature might have been done with Apple's consent as a way to bolster features in the Pre. At launch, only a dozen applications were available in Palm's application store, called the App Catalog. "Maybe the iTunes sync is not a long-term application and just for the launch," Burden said.

There are many other less-known music players on the market that Pre owners could use, if forced to do so, he said.

Ultimately, Palm's success lies in its ability to get more developer apps on its catalog, Burden said.

In fact, Palm today announced another dozen applications, including uLocate, FlightView and Citysearch, on its blog.

The company said 150,000 apps were downloaded from the beta version of the catalog on the first day the Pre was available.

By comparison, the iPhone and the iPod Touch have about 50,000 applications, from which there have been more than 1 billion downloads from Apple's App Store, which launched about a year ago. Today, Apple announced more applications that will work on its faster iPhone 3GS.