Dell promises to cut costs

Tinman Michael Dell is trading in his heart and has promised to slash more than $2 billion in costs over the next three years.

Apparently his target will be Dell’s supply chain and its sales group.As we predicted earlier this week, Dell jacked up his dividend to shareholders to keep them happy while he prepares to make the changes.

Meanwhile he told the world+dog that software and services are a key growth area. The corporate software and services business is on track for average annual growth of 10 percent until fiscal 2016, Dell said.

Michael has been writing cheques to buy companies that will help him diversify away from personal computers. PC sales have been slumping as companies have not been upgrading because of the economic slump.

Dell has bought eight companies in the past 12 months, including Wyse Technology and SonicWall.

Dell said that he now had a modest and unassuming software business. It is an area which can be grown into something a little more brash.

Dell wants to add about a billion dollars from flogging tablets running Microsoft Windows 8. It forecast PC market revenue growth of four percent by 2016. Dell, however, is not forecasting any growth in its PC business.

This means that it thinks that it will lose ground to fast-growing Asian competitors like Asus and Lenovo.

Dell’s Chief Commercial Officer (CCO) Steve Felice told Reuters Dell was fixing the structure in its sales organisation. At the moment every sale took too many people and we suspect that means that a few will be exiting the building with their belongings in cardboard boxes.

Dell has a few staff which came with its new acquisitions and these will be stuffed into the company’s general sales team, which means that some of them could also be getting their pink slips.

Felice said that the sales teams at the moment were inefficient and did not cover all of Dell’s markets.

Felice confirmed the company will have to “reposition” a couple of thousand” sales-related personnel. He didn’t mention layoffs, but if you are going to save $2 billion you have to let more than one or two go.