Dell follows HP's lead, delves more into services

Dell Inc. (NASDAQ: DELL)'s immediate foray into retail stores (with Wal-Mart Stores/ NYSE: WMT) is now being joined by a new "services" focus that will leverage the use of partnerships and acquisitions to have a goal of higher profits. In an age where Dell's direct business model and absence from retail has hurt its business considerably in recent years, the company's abrupt about-face under returned CEO and company founder Michael Dell was not unexpected.

Dell has needed bold moves and fast this year, and so far the company has not disappointed there. The company has re-loaded its executive team, brought back the founder to lead the company again, is entering retail in a closely-watched experiment and is now focusing on offering services, in addition to low-margin commodity computer products.

Hewlett-Packard Co. (NYSE: HPQ) has a strong lead here in the services sector, and it breaks out that piece of its business every quarter in its financial results. With its printer and imaging business background, in a way, the Palo-Alto company has always been in the services business. Dell's services business, however, while it exists, has not been a priority recently. Hence, when computer purchasing shifted from Dell's corporate staple to the retail consumer market, Dell's margins and profits suffered -- while HP's impeccable and fast timing helped it to capture more services business, as well as more retail consumer computer product market share.

Michael Dell told the Financial Times in London that "Dell's services business is growing faster than sales of computer equipment and represents a huge opportunity ... I think you will see some more acquisitions to add capability to our services team." Roughly translated, Dell may be on the acquisition hunt soon as it ramps up its services business unit.