Dell woos Internet startups

Dell, in a belated bid to woo Internet start-ups, has quietly formed a sales and marketing division to target Internet-service providers and companies that host Web sites.

Formation of the division, along with stepped-up investments in Internet-service and Web-hosting companies, signals Dell plans a broad new push to ally with service start-ups and sell to this fast-growing computer market.

The Round Rock, Texas, personal-computer maker named Judi L. Webster, a former Adobe Systems regional sales vice president, as vice president and general manager of the Internet Partners Division. It is part of Dell's North American sales operation.

"Dell is honing in on what we think is a spectacular opportunity," she said in an interview. The division will sell Dell's PC servers and data-storage products and be responsible for identifying Internet companies in which Dell may want to invest.

Many of Dell's rivals already have extensive links to Web startups, including offering them cut-rate gear or equity investments if they sign exclusive or long-term contracts.

But Dell, along with several computer makers, is counting on Microsoft's new Windows 2000 operating software to expand the ability of PC servers to compete for jobs once reserved for high-powered computers that use the Unix operating system and processor chips based on a technology called RISC. During the next 18 months, Webster estimated, Internet service and dot-com customers will spend between $18bn and $30bn (£11bn and £18bn) on servers alone.

Dell's new push will challenge IBM, Hewlett-Packard and Compaq Computer, which are pitching dot-coms with PC servers and high-performance machines, and Sun Microsystems, which is selling Unix-based machines to Internet companies.

Webster said Dell plans to use its custom manufacturing capabilities to offer fast delivery of tailor-made products with software already installed. Just as Sun offers preinstalled servers that can be purchased and activated as needed, Dell also will store products at customer locations for later purchase, she said.

Courting startups before they grow large may be the best strategy at this stage, analysts say. "A lot of the Intel [PC-server] vendors are setting up alliances with tier-two and tier-three companies," says Ashok Kumar, analyst at US Bancorp Piper Jaffray. "The RISC vendors have already grabbed the big boys like Qwest and Corio."

Dell recently landed a $40m contract to supply its biggest PC servers to USinternetworking and edged out Compaq for a separate deal with Toys "R" Us. It has coupled its sales with investments in Web-site-hosting and applications-service companies, including Interliant and NaviSite. "Investment is naturally offered as part of the program," Webster said.

More important, she said, the division should ensure that Dell products are considered whether a customer is buying servers or chooses to outsource its operations to a Web-hosting or application-service company. Dell also will refer corporate customers interested in outsourcing Web operations to those firms in which it has an investment, she said.

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