Dell Inc, the world's third largest PC producer by shipments, is shifting its core business from PC manufacturing to software because of the global recession in the PC market. [Photo/Provided to China Daily]

Manufacturers seek out other options to keep profit margins

Dell Inc, the world's third-largest personal computer manufacturer and one of the most time-honored players in the hardware-making industry, is betting on a 1-year-old software unit to redefine its brand after the global PC market started to suffer from declining sales and the company announced it was going private.

Company executives said developing Dell's software and corporate technology service arms is a critical step for the company's transition in the post-PC era.

Dell's software group is projected to bring the company $2 billion to $3 billion in revenue over the following three years with 60 percent of the current revenue generated out of the United States, said John Swainson, president of the unit.

Software group

The IBM Corp veteran and former chief executive officer of software company CA Technologies Inc was recruited by Michael Dell, founder and CEO of the Texan company, only last year to build a software group from scratch.

"The biggest accomplishment is in one year we successfully created the software group and made a number of acquisitions to give us what I would call critical math around the business," said Swainson.

Dell started to push the growth of its software group through mergers and acquisitions well before the establishment of its own unit.

In August 2010, Dell launched a high-profile bidding war for storage company 3Par against the world's largest PC maker Hewlett-Packard Co. Although HP won the bid eventually, spending $2 billion, it marked the start of Dell setting off on its acquisition spree to build competitiveness in its corporate software sector.

Dell's previous purchases include software developer Quest Software, security appliance developer SonicWall Inc and disaster recovery specialist AppAssure.

On May 6, Dell announced it was acquiring Enstratius Inc, a provider of cloud management software. The acquisition represents Swainson's latest effort to add muscle to the software unit.

As of today, the group's software group has more than 1,600 engineers and 2,500 sales personnel.

Going private

In February, company CEO Michael Dell said he will cut loose from Wall Street and take Dell private at a cost of $24.4 billion, the biggest leveraged buyout since the financial crisis.

Dell executives later told Bloomberg News the company will focus on expansion of the software and services segments in a strategy to expand its offerings for large companies, with the goal of becoming a full-service provider of corporate computing services in the mold of the highly profitable IBM.

"The whole point of going private is to be able to accelerate the transformation - and the software business is a part of that transformation," Swainson told China Daily in late April, adding he does not anticipate any long-term change or even big short-term changes in terms of company objectives.