Dell to double domestic revenues

The $58 billion hardware giant Dell expects its revenues from India to double, touching the $1 billion mark (around Rs 4,450 crore) by 2007-08 from the current $0.5 billion (around Rs 2,225 crore).

This represents a growth of a little over 70 per cent year-on-year, Michael Dell, chairman and CEO of Dell told mediapersons. A few weeks into his second life (he also has a Dell Island in the virtual world called 'Second Life') as Dell's chief executive, he is here in India to work out how the country (after his visit to Taiwan where he flies back tomorrow) can contribute to his overall plans of resurrecting the company's lost glory.

"We are about to see an evolution in technology like the world has never seen before, and India will play a key role as the total number of people online goes from one billion today "" or less than 16 per cent of the world's population "" to two billion over the next few years," he said earlier while speaking at the CII-CEO's forum held in New Delhi today.

Dell also announced his company would start commercial production at its Sriperumbudur (outskirts of Chennai) plant in July this year. It had announced an investment of $30 million over five years and an initial capacity of 4 lakh per annum - primarily desktops to begin with which comprise around 60 per cent of Dell's business in India.

"With local manufacturing in place, Dell's most comprehensive presence in the world outside the US will be here in India "" domestic sales, research and development, manufacturing, customer support, services and analytics," he added.

However, it has a tough job ahead "" both globally and in India. Globally, Dell's stock price has fallen from more than $42 a share in 2005 to just more than $22.46 today amid concerns that Dell may be losing its competitive edge. The company, that was once the poster boy of the PC world and whose supply chain practice was the talk of the industry, reported falling sales and profits and warned of several tough quarters ahead this month.

In India too, Dell's position is not strong. Dell's direct selling model has found some success in the commercial desktop market. However, it has a long way to go since in the total desktop PC market, HP led the market in CY06 followed by HCL and Lenovo, according to IDC. In terms of total commercial desktop PC shipments, HCL and HP jointly shared the number one position in CY06 followed by Lenovo. In terms of total consumer desktop PC shipments, HP led the market in CY06 followed by HCL and LG Electronics. In the total notebook PC market alone, HP retained the top spot with a market share of 38 per cent in CY06 in unit shipments. Lenovo and Toshiba were at second and third spots with market shares* of 17 per cent and 10 per cent, respectively.

The company's manufacturing plant in Sriperumbudur is expected to start shipping PCs in the second half of this year, cutting delivery lead time by 50 per cent and helping the company become price competitive. Dell India, with Rs 1,800 crore in revenues (the figures as of March 31, 2006), has been importing PCs from its overseas facility at Penang in Malaysia to cater to the Indian PC market. Typically, it used to take 12 to 15 days to ship PCs to India. Once commercial manufacturing in India commences, it expects to reduce the lead time for delivering a PC to customers by 50 per cent.

Additionally, it expects to save on air freight charges and import duty. Given the fact that the enterprise market is directly addressed by all vendors, Dell's direct model could work here. It has received FIPB clearance for the same.

Dell currently employs around 12,000 people in India. The number may go up to 15,000. This is second largest employee base for Dell outside the United States. The company outsources to both its captive and third party BPO vendors such as Genpact, Wipro BPO, Sitel and EXL. According to company sources, India is expected to become the third largest market for Dell in the Asia -Pacific and Japan (APJ) region in the next two years in terms of revenue generation.

Currently, India is in the fourth place in the region after Japan, China and Australia.