Dell? He's too hungry to worry about being cool
The very practical computer giant is buying hard, advancing on all computing fronts, and plans to take a bite out of Apple with its latest gadgets
Sunday 03 July 2011
Like much of what comes from Texas, Dell is big.
Its latest results – for the first quarter – showed the US computer maker's sales were more than $15bn (£9.34bn), with net operating profits at $1.2bn. And it's growing fast – in China, sales are up 22 per cent, while in India they have risen 28 per cent.
The company has $15bn cash in the bank, is worth $31bn on the stock market and Dell himself, according to Forbes magazine, is worth $14.6bn.
But Michael Dell isn't especially big; the 46-year-old Texan, who founded the company in 1984 with just $1,000, looks fit and slim when we meet early in the morning at the Andaz Hotel, by Liverpool Street in London. He's in the capital for meetings with corporate customers so he's smartly dressed – no Apple-style turtle necks and jeans.
But Dell is hungry, and not just because the chairman and chief executive has not had time for breakfast. He grabs a pastry before telling me how once again he's changing the company he can't stay away from. He admits Dell has had a tough few years; global demand for IT equipment dropped sharply following the financial crisis, and Dell was caught in the cutbacks. But results have improved, with Dell now enjoying its highest gross margins since 1994. Dell computers may not match the glamour of Apple but they are ubiquitous; walk into a bank, council office or shop and chances are you'll see a Dell.
Michael Dell is making big changes to the company he founded, aged 19, at college. Since returning to the chief executive's job – he had handed over to former chief operating officer Kevin Rollins in 2004 but resumed the role three years later – he has set about refocusing the business.
These changes are not always visible: Dell still makes PCs, but below the surface, the company is very different – it's heavily involved in IT services, through its purchase of Ross Perot's Perot Systems, and it is investing heavily in research and development. Dell will spend "into the billions" on research annually.
More organisations are able to run all their IT systems using equipment from Dell, such has been the firm's recent thirst for acquisitions in areas such as data storage, Mr Dell explains. Compellent, EqualLogic, PowerVault, KACE: these might not be household names, but they have helped to build Dell's enterprise business – selling to large firms and governments – to one that turns over $18bn a year.
Dell has become an acquisitive company. Dell says the business will sign eight deals this year. It is now a significant player in areas such as the servers and storage that run large companies' IT systems, and it is spending $1bn on a new data centre to support its push into cloud computing.
Dell firmly believes that companies will spend more money on cloud computing and data management as the economy recovers.
But his company faces some real challenges too. PC manufacturing, which is still the bedrock of Dell's operations, and its best-known business, is under threat from larger and more fashionable rivals. HP's turnover, at $128bn, is more than twice that of Dell. And Apple, on the back of its success with the iPhone and iPad, is now valued at $309bn, or 10 times Dell's market cap. It is not clear how Dell could, or even should, respond.
It seems to be moving away from Apple and more into HP's territory, but cannot quite let go of the desire to appeal to consumers too.
Dell makes smartphones and tablet computers, which compete with Apple. And Dell PCs are on sale through retail chains, including Dixons and John Lewis, something that was unthinkable to the "old" Dell, which sold only directly.
But the company has slimmed down its portfolio of consumer computer brands from five to three. And it has largely abandoned its foray into consumer electronics devices, such as televisions.
"We will refresh our consumer products. It is a profitable part of our business. But if you look at our acquisitions, they are not in consumer technology," Dell says. In the US, the brand still sells TVs and other electronic gadgets online, but instead of its own products these are from other brands, such as Samsung and Sony.
The focus really is firmly on business devices, says Dell. "We've been accused of being practical," he says. "Guilty as charged!"
But by no means everyone understands the "new" Dell.
"There are people viewing Dell as it was five years ago, rather than as it is today," he says. "Customers understand what we are doing, but we've work to do for the broader audience, explaining how we have transformed the company and how we are still doing it, moving the company along this path of solutions and services, deeper into the enterprise."
And whereas once Dell prided itself on its highly efficient manufacturing and supply-chain operations, today the firm is using its scale and customer base to bring the technologies that it acquires to a wider market.
"We tend to look for technology that is at the intersection of critical areas that drive a lot of value for customers: cloud, mobility, services, security, data storage and protection," explains Dell. "Our acquisitions have been pretty consistent and have built substantial track records in scaling these."
For EqualLogic, a company that designs data-storage systems for larger businesses, Dell has increased its customer base from 3,000 businesses to 30,000, and has also increased the size of the company's development team.
"The ingredients for our acquisitions are companies with great technologies and a great development team, but which are relatively unknown," says Dell. "We bring distribution and customer access. Because we have tens of millions of customer relationships we can bring these products to many more customers."
Will he make more acquisitions? "Absolutely, no question."
And he also thinks there is still plenty of life left in the core PC business, especially in emerging markets. "When these markets adopt technology, they don't first buy business intelligence or super advanced infrastructure. They buy PCs," Dell says. "You start with a pretty basic computing infrastructure, which is PCs. It is common sense for us to be in the client [PC] business."
And Dell expects to see growth in tablet devices. Consumers and business users now have three choices for portable computing: a smartphone, the tablet and the laptop, he points out.
"The interesting question is, does one device replace another, do they complement each other, or do you have to have three? Getting a smartphone doesn't mean you give up your PC," he says. And although Dell already makes smartphones and smaller tablets, Dell hints strongly that a 10-inch tablet, based on Google's Android software, is in the works.
"You will see significant growth in Android – not too long ago, no one had heard of it," he says.
This, though, would put Dell in direct competition with Apple's iPad, the runaway market leader, and see the business-focused Dell go head to head with the world's most fashionable technology brand. But can solid, value-for-money Dell ever be cool?
"Why don't you call a professor of cool and ask him? I am not too worried. I am pretty cool about it," says Michael Dell.
Born: 23 February, 1965 in Houston, Texas.
Education: One year at the University of Austin, then dropped out to run computer business full-time.
At school, he is reported to have earned $18,000 in a year by finding subscribers for the Houston Post. His first foray into technology was the purchase of an Apple II computer, aged 15, to understand how it worked.
Personal: Married Susan in 1989. the same year the picture, above, was taken. They have four children.
Career: Founded Dell in 1984, using his savings. The company was first called PCs Ltd but changed its name to Dell Computer Corporation in May 1984. Dell was listed as the youngest chief executive of a Fortune 500 company in 1992. He stepped down in 2004, remaining as chairman, but returned to the role in 2007.
He serves on the Foundation Board of the World Economic Forum, the Technology CEO Council and as a governor at the Indian School of Business in Hyderabad.
Charitable concerns: The Michael and Susan Dell Foundation was set up in 1999. The initial remit was fund education and children's health projects in Texas. Since then, the organisation has started to work overseas, including in India and South Africa, as well as in the US.
It has provided more than $700m (£436m) to organisations in those countries so far, and has expanded beyond health and education to work in areas such as microfinance programmes for poorer families.
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