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Dell Sheds Light on Turnaround Plan

The PC maker sees small business and global customers as keys for growth.

SAN FRANCISCO -- Small businesses and international consumers are at the heart of


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plan to revitalize itself.

The Round Rock, Texas, PC company, which made its name selling computers directly to large corporations, is rewriting its game plan as it looks for ways to compete in a changing market.

"What we're starting to see emerge is a bit of a different focus," founder Michael Dell said about his company at an event in San Francisco to release a new low-cost storage product for small and medium-sized businesses.

"We're pointing the company into new areas and making a number of longer-term investments," Dell said.

The comments are among the few nuggets of information that Dell has publicly provided that shed light on its turnaround plan. Since Michael Dell

reclaimed the CEO post earlier this year, the company has provided little guidance to Wall Street about its strategy and direction, due in large part to an

accounting investigation that has precluded Dell from hosting quarterly conference calls with analysts.

In the past year, Dell has suffered a number of setbacks -- from the accounting investigation to product quality problems -- and lost its spot as the world's No.1 PC maker to


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In its most-recently-ended quarter, Dell said,

sales increased 5% year-over-year to $14.8 billion, while net income jumped 46% to $733 million.

Michael Dell said Monday that business among its traditional base of large corporations is "looking pretty good," despite recent industrywide concerns that capital spending on technology could suffer due to volatility and lack of liquidity in the markets.

While the banks and financial services firms that Dell counts among its customers are particularly vulnerable, Michael Dell said that many have already locked their IT spending plans in place for the remainder of the year.

But Dell's bigger ambitions for growth appear to be about selling laptop and desktop PCs to small businesses and to consumers outside of the U.S.

According to Dell, the company's consumer market share in most countries around the world is 10 times less than its share of sales to large corporations in those countries.

"We've got lots of running room to grow," said Dell.

"Demand and interest in having a Dell product in consumer is significant," he said.

The company has already taken steps to court international consumers by announcing partnerships with retailers in Europe and Asia -- a striking departure from Dell's traditional strategy of selling PCs directly over the phone and the Internet.

In the U.S., meanwhile, Dell recently began selling PCs at


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stores, a move that Michael Dell described as "an experiment" that presages more substantial retail deals that have yet to be announced.

Company executives also hinted on Monday that Dell does not plan to stand on the sidelines in a world full of sexy gadgets such as iPhones and Blackberries.

Chief Marketing Officer Mark Jarvis said that Dell was preparing to roll out new consumer products beyond PCs. The new products, which Jarvis would not describe, will "take us into new segments in the consumer market," he said.

Dell has stumbled in earlier attempts to step outside of the PC business, canceling an MP3 player and reportedly shutting down its business making flat panel televisions. But recent moves, such as the hiring of former Motorola Vice President Ron Garriques and the

acquisition of MP3 software company Zing Systems, have led to speculation that Dell wants to try its hand at the consumer electronics space once again.

As for questions about whether Dell is a company with the creative spirit to dream up innovative, sexy gadgets, Michael Dell pointed to the company's latest line of consumer notebooks,

which come in such colors as flamingo pink and espresso brown.

"We have to apologize because we might have excited them a little too much," he said, referring to consumers who have seen their orders for the new notebooks delayed.

That line of reasoning seems somewhat curious, however, given that the PC maker has already acknowledged that the delays are due to problems painting the notebooks in the new colors -- even lackluster demand is too much demand when a company can't actually manufacture the product.

Dell shares were up 5 cents at $26.60 in extended trading Monday.