Dell Looks to Cut $2B in Costs Over Three Years

Dell Inc plans to slash more than $2 billion in costs over the next three years, primarily from the supply chain and sales group, as it continues to shift its focus toward catering to the technology needs of corporations.

Shares in the No. 2 U.S. PC maker, which plans to pay its first dividend to shareholders this year, climbed more than 4 percent on Wednesday.

The company sees software and services as a key growth area, Dell executives told analysts at a conference in Austin, Texas. The corporate software and services business is on track for average annual growth of 10 percent until fiscal 2016, it said.

The PC maker has been actively snapping up companies as it tries to diversify away from personal computers, a market where growth is decelerating as Apple Inc's iPad and other mobile devices pulls consumers away.

Dell has acquired eight companies in the past 12 months, including Wyse Technology and SonicWall.

"We have a modest software business and that's an area where we can grow rapidly," Chief Executive Officer Michael Dell said at the conference. "We've had some nice acquisitions, which are off to a good start."

Dell on Tuesday said it will start paying a dividend of 32 cents a share annually, raising its target for distribution of capital to shareholders to 20 percent to 35 percent of free cash flow.

That payout follows disappointing fiscal first-quarter results that spurred fears that global tech spending is weakening faster than anticipated and raising doubts about the PC maker's strategy.

Dell has been diversifying its revenue base in the face of weakened consumer demand, giving up low-margin sales to consumers and moving into higher-margin areas, such as businesses in the public sector and the healthcare industry.

Dell Chief Financial Officer Brian Gladden said acquisitions will continue to be an important focus for the company.

Dell's shares rose 4.3 percent, or 51 cents, to $12.48 in morning Nasdaq trading. (Reporting By Poornima Gupta; Editing by Maureen Bavdek)