Dell Shifts Focus To Reboot Business

Deep in the heart of Dell headquarters [in Round Rock, Texas], where it is 99 degrees in the shade outside in early September, something else was heating up.

A bidding war with Hewlett-Packard over 3Par, a relatively obscure Silicon Valley data-storage company, had topped $2 billion, and Dell was weighing whether it should up the ante. Dell eventually bowed out after HP agreed to pay about $2.4 billion, but the frenzied pursuit underscores the lengths to which Dell and its rivals are willing to expand beyond their core PC business into more profitable areas such as data storage, services and network equipment.

For Dell, it’s part of a “massive refresh cycle” of PCs and data-center services that began in mid-2009 and should energize the company’s revenue for several quarters, says Matt Eastwood, an analyst at market researcher IDC.

With the economy in tatters and most of its tech brethren scrambling to branch into more profitable side ventures, Dell continues to reengineer and reposition while it copes with other issues. The PC maker recently reached a $100 million settlement with the Securities and Exchange Commission after an accounting investigationobe. Some analysts are also concerned about a decline in Dell’s gross profit margins and whether it is spending enough on research and development.

Indeed, Dell is returning to its roots. The 26-year-old company, whose first customers were companies and universities, is focusing on contracts with large businesses of more than 500 employees, federal and state governments, non-profits and education. To a lesser extent, it is pursuing small business (less than 500 employees) and consumers.

“This is an incredibly exciting time for Dell and for the IT industry,” says CEO Michael Dell, who returned as CEO in early 2007 to re-energize the company he founded. “Our current growth strategy is more closely aligned than ever with our customers’…

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