Dell Eyes Latin America to Expand Market Share

MIAMI _ Wall Street may be cool to the latest sales forecasts from Dell, the world’s largest computer maker, but its Latin American performance has been sizzling _ especially compared to more tepid growth in the United States.

“There’s always pressure in the corporate world,” said Terry Kahler, vice president of Latin America at Dell. “But we had really a stellar year last year.”

Kahler _ who works out of Dell’s headquarters in Round Rock, Texas, just outside Austin _ was in Miami for three days for meetings with customers _ especially corporate customers with headquarters in South Florida.

After growth of 15 to 20 percent for several years, investors were disappointed over a company forecast of single-digit sales growth in the first quarter of this year.

That’s prompted Dell to put more emphasis on international growth. Chief Executive Kevin Rollins, for example, said recently that the company, which sold $56 billion of computers worldwide last year, was looking to boost its European sales and sales to corporate customers.

While Dell sales in this hemisphere rose 10 percent in 2005, the countries outside the United States _ predominantly Latin America _ had sales increases of 33 percent, a rate that even outpaced Dell’s 28 percent revenue growth in China last year.

Still, Dell’s market share in Latin America is small compared with its 35 percent in the United States.

“The strategy in terms of growth is to grow faster outside of the United States,” Kahler said. “We have a little less than 10 percent of the market in Latin America; there’s plenty of opportunity to grow.”

The biggest jump in sales came in Brazil, where lower taxes and exemptions from import duties on lower-priced computers have helped spur on sales in Latin America’s largest market, Kahler said.

“We have grown faster in Brazil than elsewhere,” said Kahler, adding that the strengthening of the Brazilian currency, the real, from almost four to $1 to around two to $1, also has boosted revenue.

Brazil has also seen the drop in sales of computers made on the “gray market,” which means they are assembled with parts smuggled into the country.

Kahler said that 65 percent of the computers sold in Brazil are gray-market computers, although the level has dropped from 75 percent a year ago, partially because of pressure from PC makers such as Dell.

The price differential between gray-market computers and licensed ones has fallen from 40 percent to only 15 percent, which also offers an incentive for companies and consumers to purchase Dell computers.

In contrast to most computer makers, the Texas company assembles computers in the international region in which they are purchased, using imported and locally made parts. That means computers for sale in the United States are often assembled here.

The strategy offers customers a just-assembled model and saves the company transportation costs, Kahler said. Most computers sold in South America are assembled in Brazil.

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(c) 2006, The Miami Herald.

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