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Dell Inc. (DELL) still plans to focus on growing its storage business, including improving its relationship with data-storage giant EMC Corp. (EMC), following the company's failed bid for 3Par Inc. (PAR), Chief Financial Officer Brian Gladden said.
Speaking Wednesday at the Citi Technology Conference in New York, Gladden added that he expects to see continued weakness and demand deterioration in the company's consumer business as people hesitate to make purchases. He added that nascent markets for tablets is also keeping some consumers on the fence as they wait to see how those products evolve.
But Gladden said demand remains strong in enterprise, especially small and medium businesses, and government customers are continuing to spend despite long-term uncertainty around deficits.
On storage, Gladden said Dell will focus on growing its organic business, as well as look to other potential assets in the market, noting that Dell will work to "improve and invigorate" its relationship with EMC.
Dell resells high-end network storage products made by EMC, an arrangement that analysts say erodes margins on its storage-products revenue. But Dell's bid for 3Par worried investors that the company's relationship with EMC could be strained and altered to be even less lucrative for Dell.
Gladden said Wednesday that the company's relationship with EMC is an important part of Dell's future.
The comments come a week after the bidding war between Dell and Hewlett-Packard Co. (HPQ) for 3Par finally came to an end. H-P ultimately prevailed with its $33 a share for 3Par, a whopping premium to 3Par's closing price of $9.65 before Dell's initial $18 a share bid was made public. Both companies had seen 3Par, which makes data storage products that enable cloud computing, as giving them an edge in the high-end storage market, as well as boosting margins.
Gladden said that H-P's success with the 3Par acquisition largely depends on the company's execution. He added that Dell clearly liked 3Par's technology and saw the opportunity to grow the business, and H-P likely modeled for the same sort of results.
Dell felt the downturn longer than most companies, largely because the corporations that account for a large portion of its revenue were among the first to cut back. But the company is expected to benefit for the rest of the year as businesses and governments continue to replace aging computer systems.
Lower component costs in the second half of the year should provide a tailwind to margins, Gladden said, as should the company's plan to reposition and recommit itself to high-end computing.
-By Shara Tibken, Dow Jones Newswires; 212-416-2189; firstname.lastname@example.org