Arik Hesseldahl

Recent Posts by Arik Hesseldahl

Dell Software Head Swainson Takes Aim at $5 Billion in Sales

Here’s one big step on the road to transformation at computer giant Dell: $5 billion in software sales. That’s how much the company’s new head of its software division says he wants to report in the coming years.

John Swainson (pictured), president of Dell’s Software Group, whose hiring I covered earlier this year, made the declaration at a roundtable discussion in San Francisco, according to a Reuters report.

Big plans for software fit right in with the big transformative plans that CEO Michael Dell talks about so often these days, and on which he elaborated in detail in an interview with AllThingsD earlier this week.

One big step on that road is the $2.4 billion acquisition of Quest Software, which Dell announced earlier this month after outbidding a group of private equity investors.

Last year, Quest reported sales of $857 million; given a year, it’s not unrealistic to see it adding a billion or so in incremental revenue next year, on top of the $1.2 billion in software revenue — or about 2 percent of Dell’s $60 billion in overall revenue.

But remember that software is always more profitable than hardware: Assuming 30 percent margins, software could end up punching above its weight on Dell’s income sheet. As Swainson put it in comments to Reuters:

As you get to a number like $5 billion, it starts to become a meaningful number on the bottom line … If you were at $5 billion software business with 30 percent margins, that would be roughly $1.5 billion in net income.

And Swainson is probably the man for the job. Last year, he was lured to run Dell’s nascent software business, after having been offered a nearly identical job at Hewlett-Packard.

From 2004 to 2009, he rebuilt the tattered reputation and balance sheet at CA, the company formerly known as Computer Associates, with one goal in mind, taking over from prior CEO Sanjay Kumar, who was sentenced to 12 years in prison following an accounting scandal. The company paid $225 million to settle federal charges brought by the Securities and Exchange Commission and the Department of Justice. Before CA, Swainson had spent 26 years at IBM, including seven years running the Middleware business he created.

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