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Sunday, December 17, 2017
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IT industry has yet to recover, Michael Dell


Wednesday, September 03, 2003

While some financial and market analysts maintain that a business IT upgrade cycle has begun, citing growth in PC sales, one of the leading U.S.-based PC makers isn't quite so bullish.

While there has been some growth in the PC market in the short term, the industry has yet to recover in terms of aggregate volume, said Michael Dell, chairman and CEO of Dell Inc. Dell overtook Compaq to become the largest PC manufacturer in the U.S. in Q2, and some analysts predict it will soon do so on a global basis as well.

PC unit volumes have just gotten back to the level that they were two or three years ago, during the boom times, Dell said, addressing a Citigroup Smith Barney technology investor conference today. "It's really hard to call that massive growth," he said.

He acknowledged that in terms of year over year growth, particularly in the last couple of quarters, Dell Inc.'s business has improved considerably. Most of the improvement has been in the consumer and small business markets. In the United States the company's consumer business was up 47 percent year over year, and its small business sales were up 30 percent year over year.

Business in Asia is also up for Dell Inc., particularly in China, where business was up in Q2 71 percent, said the company's CEO.

But the long-awaited pickup in business or corporate IT spending is not taking place, at least not like many had hoped, Dell suggested. Corporate IT upgrades have begun, but its not exactly what one would call a boom

"The large corporations tend to be the slowest to react to changes in the economy," he said. This year's corporate budgets were set last year, before macroeconomic indicators had begun to improve. What improvement is happening in corporate spending is therefore happening slowly.

There are other factors this time around as well. Many companies are replacing proprietary Unix-based with open-standard hardware running Windows or Linux, which costs considerably less, Dell said. This allows business customers to increase IT capacity while spending less than they have in the past, a problematic for the hardware industry as a whole, he noted.

Furthermore, many companies are upgrading PCs as necessary over time, in a gradual manner, rather than replacing the bulk of their PCs unilaterally, thus spreading out the purchases over a number of quarters, Dell said. So while the PC market is growing, it's not a huge groundswell but a gradual improvement, he concluded.

By: DocMemory
Copyright 2003 CST, Inc. All Rights Reserved

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