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Dell Warns Of Technology Commoditization

The commoditization of IT equipment will accelerate in the years ahead, according to Michael Dell, chairman and chief executive of Dell Inc. And many companies that generate much of their revenue from proprietary products face an uncertain future as customers...

The commoditization of IT equipment will accelerate in the years ahead, according to Michael Dell, chairman and chief executive of Dell Inc. And many companies that generate much of their revenue from proprietary products face an uncertain future as customers opt for similarly efficient but less expensive technologies, he told an industry conference Tuesday. Dell, whose $40 billion company has snatched market share from rivals in the PC and server markets by leveraging its vaunted manufacturing and supply-chain efficiencies to lower prices, said he foresees stronger demand for IT equipment in 2004. But he warned that higher unit shipments may not necessarily translate into higher revenues.

Speaking via satellite to attendees at the Sixth Annual Needham & Company Growth Conference here, Dell said although many corporations, especially small- and medium-size companies, are finally spending more on IT equipment, they are often opting for hardware that's not proprietary. The tactic is gutting revenues at some vendors, Dell said.

"In the server market, it's quite possible that units, server capacity and processing power can grow dramatically while revenue can actually decline because we are replacing mainframes and supercomputers with high-performance clusters," Dell said.

"You could have a decline in your spending but a dramatic increase in your capacity because of all these disruptive technologies," he added.

In remarks aimed at those who have criticized his company for not spending as much as some rivals on R&D, Dell said the PC maker seeks to leverage existing technologies that can be brought to market more quickly.

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