Dell steps up India plans after delisting

As growth surges, Dell has increased its research and development investments in the country to 2.3% of revenue from 1.6% of sales before de-listing

Amit Midha likens Dell to a start-up that is only beginning to show its potential. With revenues of over $56 billion in 2013, Dell hardly resembles a start up, but Midha's enthusiasm underlines excitement over the company's new growth strategy. As Dell moves away from being just a manufacturer of personal computers, or PCs, to a provider of end-to-end solutions, emerging markets, especially India and China, are plumb in the centre of the company's scheme of things.

"In the third quarter, India grew 57 per cent for us (quarter-on-quarter) and it's the third largest market after China," says Midha, president of Dell's Asia Pacific & Japan regions and chairman, emerging markets. "We are ramping up our retail presence in the country by putting up 800 exclusive stores in the coming one year," he add. India ranks high for several reasons. With 38 per cent revenue share in the server market in the third quarter of 2014, Dell has emerged as the top player in the segment in India, according to market intelligence firm IDC. In storage solutions too, the company is among the leading players in India. As growth surges, Dell has increased its research and development investments in the country to 2.3 per cent of revenue from 1.6 per cent of sales before de-listing.

Since delisting from the US bourse last year - a decision that was prompted by the company's need to restructure its business in the face of slowing PC sales - Dell has focused on growing its market share. The company went private after it was bought by Michael Dell, the CEO and founder, along with PE player Silver Lake Partners, for $24.9 billion, in November last year. However, its achievements have been mixed since then.

"One exception is indeed India, which has been a very strong success story for Dell over the past year. In summary, the initial signs are positive but it is premature to declare victory at this point," says Dane Anderson, vice-president, research director and region manager, Forrester Research.

Dell's delisting is part of its strategy to enter the services and solutions segment where several of its peers are still struggling. The idea, however, is not new, because it was in 2009 that Dell acquired Perot Systems for $3.9 billion in the first step towards becoming a technology services player. After that, the company has made several other acquisitions.

However, unlike other companies, Dell is not giving up its hardware business. In fact, the company says PCs will be a crucial part of the company's new story. "We are very committed to PC," stresses Midha, adding that "the top three players in the PC industry have never had a higher share than what they have today. For us it's a growth market." The company is making renewed efforts to strengthen its market share. According to IDC, Dell, in the second position, had a market share of 22.1 per cent in the Indian PC segment in 2014 (after HP with 25.6 per cent share). "It has outstripped industry average as it gained around 9 per cent year-on-year to record a 22.1 per cent market share in CY 2014 in the overall PC business," said the IDC report.

Dell's plan is to expand its footprint in Tier II cities and double the number of Dell stores in India to 800 by January 2016. Dell has already expanded its consumer presence across Tier III to V cities with the number of exclusive Dell stores going from 50 to over 400 in the past 20 months. "We think Windows 10 will lead to a new consumption cycle around touch," says Midha. "We also think that based on consumer behaviour, it's a multi-screen era. You may use several gadgets but there are certain transaction that are happening only on a PC or on a smartphone," he says.

It is too early to decide whether Dell will successfully transition to an end-to-end solutions provider. "Technology markets change very quickly and the strategic decisions made today impact success in material ways three to five years down the road. Dell's strategy has clarity of focus that provides it with some unique voids to fill as competitors divest in select markets. In the near term, we expect some benefits in Dell's core markets, but as the market continues to evolve it is important for Dell to strengthen it's software, services and solutions business as well if it expects to see long term competitive gains," says Anderson.

To keep up with the new technological trends, Michael Dell recently came out with a vision document for 2020. While Midha does not want to share details of the vision document, he does hint that the APAC region is going to be significant in the company's plans, especially as Midha says, "the Digital India project is an ambitious plan and we have shown interest in the same."