Dell on Asia: wooing a fast-growing market

HONG KONG, China (CNN) -- There may be mixed signals from industry watchers about a PC rebound, but one thing is certain.

On the back of the sector's sharpest demand fall-off in history, PC players like Dell Computer are seeking a much-needed boost here in Asia.

CNN's Kristie Lu Stout recently caught up with Michael Dell, the company's chairman and CEO, and asked what role the region plays in his global strategy.

MICHAEL DELL:

Asia is the fastest growing region for us. It is the fastest growing region in the market and certainly (it has) key markets like Japan and China which are the second and third largest markets in the world, (and) large countries like India. It's also a critical supply base for us for manufacturing, even for knowledge workers for our own IT development and services.

KRISTIE LU STOUT:

How do you plan to boost Dell's presence in the region?

MICHAEL DELL:

Absolutely, we're growing our business here. Last year our unit volumes grew 37 percent while the rest of the industry was flat. So we're gaining market share, we're growing our plant infrastructure. We've opened our largest plant in the world in Malaysia, which is also supplying notebook products in the United States. We're hiring in India to support our Dell international services, which provides support services to our business and customers around the world.

KRISTIE LU STOUT:

It looks like the HP-Compaq merger is going ahead. How does it change the game in the race for market share here in Asia?

MICHAEL DELL:

The market consolidation has been going on for some time. Dell has gained more market share in the last year and in fact the last five years than any competitor in our market. And I believe we are really well positioned to continue to do that, whether these companies are combined or separated or any combination. Our direct business model has great advantages and will continue to be very compelling.

KRISTIE LU STOUT:

You've said China is the fastest growing market in Dell's history. In fact, the Mainland is contributing about 45 percent of your overall sales in the region outside Japan. How did you approach the Mainland market to achieve that?

MICHAEL DELL:

Well, you know, in each market it's a little bit different. In China we created a product just for the Chinese consumer called the Smart PC. And we marketed it differently, we sold it differently. The payment systems are different. Customers go to a bank, bring their money. Say they want to buy something from Dell, it gets delivered literally within 24 to 48 hours. We also have a payment on delivery system where they can use a debit card. So we've had to modify and adjust our systems, but the results have been very very strong. We've seen great growth there. In particularly the enterprise, storage and server market. We have more market share there than we do in desktops and notebooks.

KRISTIE LU STOUT:

So you took a tailored approach to China...

MICHAEL DELL:

Yes, and the direct model gives us a relationship with the customer anyway so we've always tailored. In Japan we have a very successful business, a profitable business, as we do in China. In each country we have to tailor it to the unique needs of the country.

KRISTIE LU STOUT:

You're the leading foreign brand in China, but eclipsed by Legend. How do you plan to topple Legend's hold on the Mainland market?

MICHAEL DELL:

Well, that's not our goal specifically. Our goal is to grow our market share and better serve our customers. The same way Dell has done this everywhere in the world. Some have looked at the Dell business model and said "oh, this is really an Anglo Saxon concept." The data really suggests otherwise. It's an economic concept and doesn't limit itself to particular geographic boundaries or cultural boundaries. As I've alluded to, we've seen the fastest growth of any market in the world in China. We're confident we'll continue to gain market share, but it'll be on a steady basis.

KRISTIE LU STOUT:

Some say the PC has turned into a commodity. Is there a future beyond the basic PC, for example into networked devices or wireless devices?

MICHAEL DELL:

Well today, less than half our profit comes from desktop PCs. So we've really transitioned the business, but stayed in the PC business. Servers, storage, services, networking products, wireless notebook computers. We've launched a new product line in the United States to address the LAN switching market, the data networking market. We've become No 2 in the world in servers, No 1 in the largest market, the United States. Our storage shipments have grown significantly. We're shipping 190 terabytes a day. Dell has really moved beyond the PC but we're not getting out of the PC business. We have a clear and distinct advantage and for us it's a profitable business. But for competitors who can't differentiate it can very much be a commodity business.