John Swainson, president of software division of Dell Inc. (NASDAQ:DELL) is aspiring to expand the company’s software business in the near future. His objective is to increase Dell’s software revenue from its existing $1.2 billion revenue, to $5 billion per year.
Swainson expressed his plan for the company during a roundtable discussion in San Francisco. According to him, Dell’s software business offers a higher potential for growth compared to the other business units of the company. According to him, the current level of its software business was unable to provide a significant contribution to the growth of the company because it still small.
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During an interview with Reuters, Swainson said he want his division to provide a “meaningful contribution” to Dell, which has a huge PC business. He emphasized the importance of having a meaningful software business to be able to create impact to the bottom line of the company.
“As you get to a number like $5 billion, it starts to become a meaningful number on the bottom line. If you were at $5 billion software business with 30 percent margins, that would be roughly $1.5 billion in net income,” said Swainson.
He also added, his real target for the software division is to reach $1.5 billion sales over the next twelve months. He described it as “three in the 16 time frame.” He also explained that his $5 billion target will be achieved over several years, as the company shifts its core business from selling personal computers, to software and datacenter providing information, technology, equipment, and solutions. Some of the plans of the company include software acquisition or development for computer security, date analysis and business applications for midmarket customers, and PC and server management.
Some of Dells acquisitions include Make Technologies, one of the leading global providers of application modernization software and services reducing costs, risks, and time used to re-engineer applications; Perot Systems, an IT services company, and SonicWALL, a security company. It will also purchase Quest Software Inc. (NASDAQ:QSFT), provider of IT management software, for $2.4 billion. The company expects to close the deal during the third quarter of 2012. Dell won against the bid of Insight Venture Partners to acquire Quest Software. Dell expects Quest to provide approximately $1 billion additional software revenue by 2016.
During the annual stockholders meeting of Dell last week, Michael Dell, chairman and CEO, and Brian Gladden, CFO, discussed the company’s strategies to become an end-to-end enterprise solutions provider, with a competitive edge to achieve long-term growth and value for its shareholders. One of the strategies identified by Dell and Gladden is the creation of the Software Group. Gladden told shareholders that the key to Dell’s success depends on the rapid expansion of its enterprise solutions, services and software (ESS&S).
The company is gearing to compete with other technology giants including Microsoft Corporation (NASDAQ:MSFT), Hewlett-Packard Company (NYSE:HPQ), International Business Machines Corp. (NYSE:IBM), SAP AG (NYSE:SAP), and Oracle Corporation (NASDAQ:ORCL), among others.
Michael Dell took back his position as CEO of Dell, after Kevin Rollins resigned as chief executive, when the company suffered a terrible performance and lost its position as leader in the PC market to HP in 2007. Since then, the founder of the company started acquiring and expanding its computer hardware and software business units.
John Swainson joined Dell to lead the software group of the company in March 2012.
Dell’s stock value after trading hours on Thursday is up by 1.20 percent to $30.86 per share.