Dell: China Business Is Booming

Dell and China

Dell’s China sales grew 28 percent in unit terms in the year to January, accounting for about 5 percent of the company’s global business, CEO Michael Dell said on Thursday.

The world’s second-largest personal computer maker also purchased about $23 billion of products last year from China, Dell’s (NASDAQ: DELL) largest overseas market.

“Last year we spent $23 billion in China, and that made us one of the largest purchasers of electronic equipment and goods in China and one of the largest exporters,” Dell told reporters at an event to introduce the firm’s newest products.

Dell is introducing new server and storage products aimed at cost-conscious companies, betting that it can win market share as competition intensifies.

The company itself has been in cost-cutting mode for some time, shedding jobs and overhauling its corporate structure as well as increasing lower cost purchases from China.

The PC maker posted a sharp fall in fourth quarter revenue as consumers bought cheaper personal computers and overall demand remained weak, but cost cuts helped profits beat expectations.

Dell said customers were still hesitant to buy, but the company had seen “steady” orders since the middle of January.

“Generally speaking around the middle of January we saw the beginning of stabilization in the demand trend. Demand has been steady since then,” he said.

While unit shipments increased 28 percent in China — and 34 percent in Brazil, Russia, India and China together — the company still gets about half of its revenue from the United States, a higher proportion than larger rival Hewlett-Packard.

Dell said last year it aimed to increase the ratio of sales from outside the United States to two-thirds within five years.

Dell competes with network equipment maker Cisco Systems (NASDAQ: CSCO), which is moving into the server market while HP (NYSE: HPQ) has started to offer a package of services to corporate clients after its purchase of EDS.

HP also posted disappointing quarterly revenues and cut its full-year outlook.

Michael Dell believes talk of IBM possibly buying Sun Microsystems (NASDAQ: JAVA) could help accelerate a migration to servers based on standard components, Dell’s mainstay product.

However, Dell said he would be cautious about spending the $9.5 billion his company has in cash and cash equivalents.

“We will be pretty careful on finding the right things that fit with our business,” he said.

Dell is still focused on data centers, services, software, servers and storage products.

“Those are likely areas where Dell is likely to use its capital for non-organic growth,” he said.

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