As Dell outlines an aggressive growth plan, John Collins asks if its Limerick base should be concerned about proposals to expand manufacturing into eastern Europe

Dell's annual technology day in New York this week was held ostensibly to talk about the company's product strategy for the next year. It quickly turned into a discussion of how the firm could turn around its recent disappointing financial performance.

Company founder and chairman Michael Dell admitted he was not happy with the company's recent results, but said he believed it was addressing the associated issues. "As leader of the industry, we don't believe any other company has the size, scale and commitment to innovation that Dell has," he said.

The New York event was held just a day after Dell revealed that investigations by regulators into accounting irregularities had widened. Michael Dell declined to comment further on the investigation, saying he had nothing to add to a statement released on Monday, but he said he expected to be able to resolve any issues.

The investigation comes on the back of four out of five quarters where Dell failed to meet its own forecasts. In July it was also forced to issue a profit warning to investors.

Chief executive Kevin Rollins outlined the root and branch review of the company's operations that have taken place, particularly in the US and Europe, and the vision he has of the future shape of the company, which he called "Dell 2.0". This internal name denotes the difference with the Dell 1.0 model of direct sales and highly efficient supply chain that has served the company well during its first 22 years.

Rollins pointed out that, in the US, Dell has a larger market share than its three closest competitors combined.

"The model will evolve so that we have deeper customer relationships," said Rollins. "We want to be able to provide not just a customised product but a customised experience."

Dell has traditionally only dealt directly with customers over the web and phone rather than using distributors or resellers. It also built machines to order rather than holding an inventory of pre-built systems.

In recent times, it has flirted with other models such as retail kiosks in airports, but Michael Dell said direct sales would continue to be its core business.

Rollins also wants to broaden the portfolio of services the company offers. This is a common tactic in the technology industry as it provides a source of recurring revenues rather than just large sales every three or four years when a customer refreshes its hardware. The Texan computer manufacturer is also overhauling the design of its machines, which has traditionally been very conservative. It is creating new industrial design and usability teams and will have 60 designers working for it by the end of the year.

"Unlike some of our competitors, we don't design products only to be cool," said Rollins. "We will have very cool products that best meet the needs of our customers."

Recent events have led to speculation about the future of Rollins in the role he took over from Michael Dell in July 2004. However, Dell was unwavering in his support for the former management consultant. "I believe Kevin Rollins is an outstanding executive," he said. "Characterisations of the company's challenges as only being Kevin's doing are inaccurate. I run the company with him, so if you want someone to blame, blame me as well."

Dell's recent troubles can of course be overplayed and many of its competitors would love to be facing the same challenges. Michael Dell reminded the gathering of press and analysts that the company has been the world's leading seller of desktop PCs for three-and-a-half years and has been number one in notebooks for 18 consecutive months.

A recent survey by Forrester Research of large IT departments in US companies found 56 per cent had a preference to purchase Dell desktops and 53 per cent would purchase a laptop from the company.

The challenge for the company is capitalising on its dominance in PCs to move into other areas of the computer industry that can deliver the kind of growth its investors expect.

Despite its efforts to diversify - Michael Dell was joined on stage in New York by Joe Tucci, chief executive of data storage company EMC, to announce that the two companies were extending their strategic alliance until 2011 - more than 60 per cent of the company's revenues still come from desktop and laptop PCs. Storage adds just 4 per cent, while services account for 10 per cent but are growing faster than other parts of the business.

A significant part of Dell's problem is that it is hugely successful in the US but it has not been able to replicate that success in other territories.

In Europe, Ireland is something of an anomaly as Dell is the clear market leader. This probably reflects its status as a large and well-respected employer here, with over 4,300 workers.

In the second quarter, it grew more than 10 per cent in 10 of the 16 western Europe markets where it sells, but the real potential for future growth is in the emerging markets of eastern Europe. Dell has announced plans to build a factory in the region, which is currently served from Limerick, but has not yet announced the location or timescale for when it will come on stream.

Recent media reports in Poland suggested that Dell had chosen Lodz, the country's second largest city, ahead of Slovakia to locate the plant.

Dell did not provide any further information about the new factory or its likely impact on employment levels in Limerick, where it currently builds all Dell's machines for Europe, the Middle East and Africa.

Rollins said the Irish manufacturing operations in Limerick would continue to "meet the needs of customers in parts of Europe", but that an eastern European manufacturing facility was essential to be "close to customers" in emerging markets.

Given Dell's strategy of competing aggressively on price, it would seem logical that any new factory in a lower-cost economy would take over some or all of the production from Limerick. But Dell executives have always maintained the importance of the Irish factory and it has doubled its output in recent years, with sales now exceeding €10 billion. Last week, Dell also said it was recruiting 80 staff for a European enterprise expert centre in Dublin.

Given the aggressive plans for growth outlined in New York, it seems unlikely that there will be any major reduction in manufacturing in Limerick in the short term. If Limerick can become a key part of the new areas Dell wants to play in, future job cuts, although seemingly unavoidable, should be minimised.