Dell to Expand in China as Part of Asian Strategy

HONG KONG (03/06/2000) - Dell Computer Corp.'s Asia-Pacific chief today unveiled plans for the coming year to boost online sales in the region and expand the company's operations in China.

The direct-sales computer vendor aims to make half of its Asia-Pacific sales over the Internet by the end of this year, according to Goran Malm, president, Asia-Pacific.

The boost is not large -- online sales accounted for 46 percent of all transactions in Asia-Pacific in the fourth quarter of last year -- but with it, the region will match the online share of sales for Dell worldwide, Malm said.

"In Asia-Pacific, we are not far from the global standard," Malm said, addressing reporters at a press conference here. Meanwhile, sales growth in the recovering Asian economy last year far outstripped global figures, with revenue up 56 percent compared to 38 percent growth worldwide, he added. Overall, the region accounts for only about 6 percent of all Dell sales worldwide, Malm said in response to a query.

To support the shift toward online sales, Dell is looking to build more large online data centers modeled on its Asia-Pacific Web Farm unveiled last month in Singapore, Malm said.

However, the company has no plans to extend its recently established application service provider (ASP) business in the U.S. to the other side of the Pacific any time soon, he added.

China will be a major focus of investment over the next year for Dell, which opened its operations there only 18 months ago. The company soon will replace its temporary manufacturing facility in Xiamen, in coastal Fujian province, with a larger permanent facility. All PCs ordered in China and Hong Kong now are manufactured in Xiamen, allowing for an average turnaround time of four to five business days from order to delivery, Malm said.

Despite the tradition that Chinese customers prefer face-to-face transactions, response to Dell's direct model has been positive, Malm said.

"We have a different (approach) for China, which has a chance to change the business," he said.

With operations in 15 major cities in China today, Dell can provide service in a total of approximately 1,500 towns and cities, he added.

Dell recently began offering the Chinese version of TurboLinux as an option on its PCs sold in China and Hong Kong, a move that Malm said was triggered by demand in that market.

"There are more and more requests coming for Linux," Malm said. "We can deliver the OS that the customer wants."

Throughout Asia, the company plans to develop more products specifically for the region's markets, where demands are different in terms of size, style and color, he added.

Asked how Dell would respond to the growing popularity of non-PC clients such as handheld devices and mobile-phone handsets, Malm said the PC will continue to play a role.

"We actually believe the PC can become the small home and business server," he said. A PC could be the home base for portable handheld devices.

However, one analyst at the briefing said this model might not play well in Asian markets, because of space constraints in the home and the lack of wired infrastructure for PC connectivity.

"All the (other) hardware is getting smaller. Do we really need that kind of machine at home?" asked Vincent Yiu, an analyst at International Data Corp.

Asia-Pacific, in Hong Kong.

Dell's vaunted direct, Internet-focused sales model has some weaknesses against rivals such as IBM Corp. and Compaq Computer Corp. in Asia's fast-growing small and medium business market, Yiu added, because it lacks a large network of distributors for hand-holding.

Dell Computer Corp. is based in Round Rock, Texas, and can be reached online at http://www.dell.com.

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