The New York Times [registration] suggests that Dell Inc. (NASDAQ: DELL) plans a big push into computer services as part of its makeover. Its big scoop? Dell hopes to go from $5 billion to $20 billion in services revenue by 2015.

This is actually more of a change than it might appear. That's because CEO Michael Dell recruited Stephen F. Schuckenbrock last December from Electronic Data Systems Inc. (NYSE: EDS) to lead its services business, which currently gets most of its revenue from technical support and maintenance on Dell machines.

But to reach the $20 billion target, Schuckenbrock will need to build Dell into more of a computer services powerhouse. If Dell hits its target, that $20 billion will still represent 40% of International Business Machine's (NYSE: IBM) $50 billion in estimated 2007 services revenue. And the gross margins on services business, at 30% for IBM, could add a significant amount to Dell which earns a relatively paltry 18% gross margin.

If Dell can pull off this big rise in services revenue, it could make me want to look at something I have not thought about in years -- buying Dell stock.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the stocks mentioned.

Is Dell (DELL) breathing down IBM's (IBM) neck? originally appeared on BloggingStocks on Sat, 08 Sep 2007 17:40:00 EST. Please see our terms for use of feeds.