Business

Dell’s founder focuses on growth after taking the company private

Michael Dell, founder and CEO of Dell, Inc.,
Michael Dell, founder and CEO of Dell, Inc., AP file photo

Michael Dell seems to be enjoying his privacy.

This fall was the one-year anniversary of Dell Inc. going private after company founder and CEO Michael Dell led a $25 billion buyout last year, ending Dell Inc.’s 25-year run as a publicly traded company.

While Dell Inc. has operated more under the radar since, the company has by all reports accelerated its transformation into a stronger supplier of advanced information technology hardware, software and services for business customers.

There have also been layoffs, though the company has never quantified how many, but Dell Inc. still employs about 14,000 in central Texas and about 100,000 worldwide.

In a wide-ranging interview with the Austin American-Statesman in advance of this week’s annual Dell World tech conference, Michael Dell gave his thoughts on the state of his company, his competitors, layoffs and his goals. (The interview has been edited for length and clarity.)

Question: It’s been a year since going private. How is Dell Inc. doing?

Answer: The company’s doing very well; I’m quite pleased with how it’s going. We’ve been able to grow our share in key businesses (including) servers, networking. Our (PC) unit shipments, according to (industry analysis firm) IDC, grew 19.7 percent (in the third quarter in the U.S.); that compares to total industry growth of 4.3 percent. What’s interesting about that is if you take Dell out … the rest of the industry grew at 0.2 percent.

So, look, being private is great. We’re able to invest in (research and development), grow our software and services business; all of the things that we talked about doing, we’ve been able to do. And I think the market’s been a bit better, too. Customers are looking to take advantage of the cloud, mobile, big data, social, and we’re building solution ends to help them do that. We'll talk all about that at Dell World. And business is good.

Q: Along those lines, what’s the biggest advantage of being a private company?

A: Well, when you’re a public company, you have this 90-day shot clock. And what happens is, the people inside the company are very focused on the next reporting period. I’m sure that can generate some good things, too, but what I’ve found is that as we’ve moved our focus more toward the medium term and long term, we’re starting to see new opportunities that require investment today but yield benefit in six months – or a year, or two years or three years out.

And so we’re seeing those; we’re not going to do them all, but we'll do a fair number of them. And so we’re investing.

We’re now in our seventh consecutive quarter of growing the PC business, and we’ve got accelerating growth in a number of our businesses. And so we’re able to invest without really thinking about this 90-day shot clock, which, having done that for 25 years, I can tell you that it has a big influence on how decisions are made in companies.

Q: I think I read an interview where you said that 20 percent of your time now is freed up because of that. That seems like a huge amount of extra time for you.

A: Yeah, time gets poured back into customers and products and being able to grow our business. Look, when we were a little $150 million company, we needed capital to grow, and so going public was a good thing. It also helped us gain access to new customers, and other people knew about the company as we went public, that sort of thing. Well, we don’t need capital, and people know about us, right?

Q: I’ve heard people say that one of the advantages of being private, too, is there’s a competitive advantage: You don’t have to telegraph your moves or your strategy because there aren’t these reporting cycles. So Dell can move a little bit quicker and do things in private until you’re ready to release it. Have you noticed that as a plus?

A: Yeah, I think there’s a speed of decision-making, and when you’re a public company, not only are people constantly analyzing every line in the balance sheet … but they have a right to. And so it’s pretty hard to make significant moves without your competitors knowing what you’re doing.

Q: The tech landscape has obviously shifted tremendously since the founding days of Dell, and we see a lot of new competitors pop up fairly quickly. What are the biggest challenges for you going forward?

A: Well, the great news is that we’re in an enormous industry. It’s a $3 (trillion) or $4 trillion industry, depending on how you count. Nobody has more than about 4 or 5 percent of the industry’s total revenues; we have roughly 2 percent. And when I started, IT was more expensive and only affordable by wealthy companies and wealthy nations. And now, of course, IT is much less expensive and much more pervasive and growing rapidly around the world.

We have tremendous growth in emerging countries, and it’s getting really involved in everything that occurs. It used to be, (businesses had) servers in backrooms and only certain people and certain functions used IT; now everything is IT – the sales, the marketing, the customer relationships, new product design. Think about what’s going on with the whole social area and how that’s affecting customer relations and marketing and acquiring new customers.

Q: A lot of companies have gone through a lot of changes, in terms of the big tech giants, but you guys haven’t shrunk away from your original business: making PCs. But you’re also expanding and growing your business in a lot of other areas – the solutions side, and then you’ve got new initiatives like Dell Research. Is there a danger of Dell being spread too thin?

A: Well, we don’t do everything. If you look across the $3-4 trillion (industry), there’s plenty we don’t do. Our business is pretty straightforward; we have a services business, we have a software business, we have a data center business, and we have client business. (We’re) really focused on four key themes: transform, connect, inform and protect. And I really believe that being able to build end-to-end solutions requires a capability across services, software and hardware.

And if you look at the connection among those businesses, we see it every day because we’re providing customers more complete solutions. The PC was absolutely the foundation of the business, but all the other businesses, in one way or another, grew out of that.

Q: Getting back to the going-private move. One of your big competitors, Hewlett-Packard Co., recently announced that it was going to split into two companies. That seems like the polar opposite of what Dell did.

A: Well that’s not something we would have done, for the reasons I described. If you think about a company the size of HP, they operate in, like Dell, 180 countries. So each country, you have an office, (and) if you separate the two companies – now you need two offices. So half the people go to a different office; now the first office is too big, so now we need three offices. So the level of chaos and distraction that something like this causes is very significant, so they must have believed that there was some tremendous benefit to it.

I think there were lots of financial analysts that looked at the math, in terms of the synergies and the costs. We see an enormous connection, between particularly the commercial client business and the server business. So they’re breaking that connection. We'll see how it works out for them. Every company that has spun off, or sold off or exited the PC business in one form or another has ultimately failed in the server business.

Q: Also, since going private last year, we’ve heard reports of Dell downsizing a bit, employee-wise. Can you elaborate on why, and do you have additional such plans in the immediate future to continue doing so?

A: Well, we’re adding people selectively, and in certain areas (we’re) not adding people. We did this voluntary separation program, which we thought was a more humane way of dealing with that. But I think if you look over our 30 years, or any company, there certainly are areas where you need more people, like in sales and R&D, and other areas where you need less people. And so we’re just doing the normal things. There’s nothing significantly different from what we’ve been doing in the past.

Q: Going forward, do you have specific goals for Dell in areas that you’d like to grow your businesses … and what are your broad goals for the company?

A: Well, we want to continue to build our end-to-end solutions capability. (We’d) like to stack on another five or 10-plus quarters onto the seven we have of growing consecutively in the client business. The data center business is accelerating its growth; we want to gain share there. So broadly speaking, growth is a high priority, so we’re investing in that.

We are adding sales people; we’re adding R&D folks into the company to support that. We'll continue to make selective acquisitions; we acquired a predictive analytics company, so whether it’s our internal R&D, acquisitions, or alliances and partnerships, we'll continue to broaden the ability to help customers solve the most relevant problems that they have.

  Comments