Dell Ventures to Broaden E-Commerce Investment

Dell Computer Corp. (Nasdaq: DELL), the number one direct seller of computers in the United States, has announced that its Dell Ventures unit will broaden its scope of operations to include equity investments and incubation services for new e-commerce companies.

Thomas J. Meredith, the company’s chief financial officer for the past seven years, has been named a managing director for the group. Alex C. Smith is also a Dell Ventures managing director.

Chairman and Chief Executive Officer Michael Dell said the ventures group will help the companies it invests in with strategy development and professional services.

“We are particularly interested in early-stage companies with products and services which have the potential to create breakthroughs in the evolving Internet age, with an aim to integrate those products and services into Dell’s business and drive our future growth,” he said.

E-Commerce Potential

Dell Ventures, formed a year ago, has invested more than $700 million (US$) in more than 90 companies, including Red Hat, Inc., Storage Networks, Inc. and Sina.com. Investments have been aimed mainly at companies that can capitalize on the growing Internet infrastructure for business-to-business (B2B) and business-to-consumer (B2C) e-commerce.

“This is an extraordinary opportunity for Dell to continue to evolve in providing great value to its customers and shareholders,” said Meredith.

Dell has unrealized gains of more than $2 billion from its investments in startup ventures, and there are 11 companies in its portfolio that plan to go public, the Wall Street Journal reported. Dell does not have a fund set up for the ventures unit, with money coming instead from available cash. The company does not disclose the sizes of individual investments.

E-Operations Strong in Latest Quarter

Dell, based in Round Rock, Texas, reported fourth-quarter earnings of $436 million, or 15 cents a share, compared with $425 million, or 15 cents, in the year-earlier quarter. The company said an “inconsistent” supply of semiconductor components and slow orders following the Y2K rollover kept earnings down. Still, the company’s return on invested capital was 281 percent.

Online sales were also strong in the quarter, averaging $40 million a day by the end of the quarter, up from $14 million a year earlier. The company said at the time that it was looking to the Internet to boost future growth.

Dell shares were down 3/16 to 53 5/8 in early trading Thursday.