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Dell to cut $2 billion in costs amid shift from PCs

June 13, 2012|By Tiffany Hsu
  • Michael Dell, chief executive of Dell Inc.
Michael Dell, chief executive of Dell Inc. (Paul Hilton / Bloomberg…)

Dell Inc. said it is looking to excise more than $2 billion in costs over the next three years as it tries to move away from personal computers toward more profitable software and services.

The company is trying to recast itself as a broader technology company "unencumbered by a legacy of old stuff," said Chief Executive Michael Dell at an analyst meeting in Texas, where Dell is based.

Most of the cuts will come from Dell's supply chain and sales groups, executives said. The PC business will be scaled down with a roughly $1-billion reduction over the next few years.

Smartphones, tablets and other mobile devices have sucked sales from PCs, forcing companies such as Dell and competitors Hewlett-Packard and Lenovo to build out their other enterprise offerings, including data center products and networking businesses.

The industry, Dell said, is "constantly in transition."

"We have a modest software business, and that's an area where we can grow rapidly," he said, also mentioning that "the mix of the business has clearly shifted."

To wit, Dell has been on an acquisition tear recently. In the last 12 months, it's bought eight companies, including cloud computing business Wyse Technology last month and security company SonicWall.

Dell executives said they expect average annual growth of 10% through fiscal 2016. On Tuesday, the company said it would start paying a dividend of 8 cents a quarter.

Dell stock was trading up more than 3% at $12.35 in afternoon trading in New York.

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