Dell zeroes in on procurement

IT PRODUCTS    MANUFACTURING OPERATIONS    IT SPEND

Global - Dell will focus on greater efficiencies in design and procurement in a bid to optimise operations and reduce cost.

The company said it intends to focus on optimising liquidity, profitability and growth and is on course to reduce costs by US$4 billion by the end of fiscal year 2011.

Much of that efficiency drive will come from "greater efficiencies in design and procurement" and the optimisation of manufacturing and supply chain logistics, said Brian Gladden, CFO of Dell.

Recently, the company announced that demand for its IT products appears to have stabilised, and expects to report a gradual increase in revenue during its fiscal second-quarter 2010, ending 31 July.

The company further predicts a modest decline in Q2 gross margins, due to higher component costs, competitive pricing and an unfavourable mix of product and business-segment demand.

Gladden said while demand for Dell's products and services seems to have stabilised, this varies significantly by customer segment and geography.

For the long term, Dell will be targeting 5-7% compounded annual sales growth, operating income at or above 7% of revenue, and cash flow from operations exceeding net income. However, such results are dependent on broad global economic improvement accompanied by higher worldwide IT spending, including a sustained double-digit growth rate in demand for computer systems, the company said.

"We continue to believe that customers are deferring IT purchases and that we will see demand return to more typical levels at some point... In the meantime, we continue focusing our energy and resources on the operating initiatives that will improve the company, and position us for future success" Gladden said.  

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