Dell Warns Of Technology Commoditization, Sees IT Pick-Up

NEW YORK - The commoditization of IT equipment will accelerate in the years ahead with many companies that generate much of their revenue from proprietary products facing an uncertain future as customers opt for similarly efficient but less expensive technologies, according to Michael Dell, chairman and chief executive of Dell Inc.

Dell, whose $40 billion company has snatched market share from rivals in the PC sector by leveraging its vaunted manufacturing and supply-chain efficiencies to lower prices -- a strategy Dell has now trained on the server market -- said he foresees stronger demand for IT equipment in 2004. He added that higher unit shipments may not necessarily translate into higher revenues.

Speaking Tuesday (Jan. 6) via a satellite link-up 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 not based on proprietary technologies. 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.

"There's an abundance of great technology available to Dell to bring to market and we don't want to replicate or duplicate them," he said. "Anyone who has developed a great technology and wants to get it to market should come down to [Dell's Austin, Texas, headquarters] and talk with us."