I had a chance to do a quick interview with Michael Dell last week and thought it would be interesting to capture his thoughts on what is going on at the company in anticipation of the analyst meeting later this month. I’m going to use some editorial license on his responses. To fill the gaps I’ve taken the extra steps to have Dell approve this as accurate. The questions cover the changes at the company Michael Dell is driving, his view of Tablets and Smartphones, Acquisitions, and what to expect at the coming Dell analyst meeting.
On changes at Dell
Question: Dell has changed a great deal over the last decade; I expect it will change a great deal during the coming decade. If you were to describe Dell in 2022, what would that Dell look like?
Answer: In 2022 Dell has become a true end-to-end solution provider, vertically-focused, solutions-focused and creating value for customers. We are not a copy of HP or IBM. We don’t have to protect aging legacy businesses; we can buy firms that are leading in a critical technology area and be faster to market with a more advanced solution to leapfrog those companies.
We will have end to end solutions, but rather than being based on thinking that goes back decades, our solutions will be based on contemporary thinking by young companies that have already proven their success. By 2022 we expect to lead this solutions market, not by chasing IBM and HP from behind but by using acquisitions to jump ahead of them.
On tablets and smartphones
Question: Everyone is excited about smartphones and tablets at the moment and Dell has pulled back from this segment. Why do you feel that is the strategic play to make and what conditions will have to exist before you reenter (or will you ever reenter)?
Answer: Currently the tablet market is really an iPad market and the smartphone market in our space is defined by troubled vendors like RIM and Nokia who are struggling for survival. Microsoft Windows 8 is exciting, and you’ll see a lot of activity from us as Windows 8 becomes available, for now we are more interested in the business solutions to Smartphones regardless of who builds them.
If the market changes so that a vendor like Dell can compete with smartphones more successfully we’ll likely reenter but, until then, our focus is going to be on managing, securing, and keeping these devices fed. We have many avenues to success and that falls closer to our emerging core competence. The recent Wyse acquisition strengthened significantly, for instance, our ability to uniquely manage, provision, and securely provide services to both tablets and smartphones, expect to see our biggest emphasis, at least for the short term, on that aspect of this business.
On acquisitions:
Question: You have been unusually successful with acquisitions. What do you do that is unique and how did you come around to the idea of doing acquisitions in this way?
Answer: First you have to understand that value doesn’t come from acquiring companies it comes from what you do with them. We look at over 250 companies a year to fill gaps we have identified in our product lines. We then generally partner with many of them to understand their strengths and weaknesses and then purchase the few that make sense for us to own. We lead with a massive amount of analysis and follow with execution based on what we have learned to focus sharply on addressing the acquired firms known shortcomings, which often come down to just scale. We can give these firms scale very easily.
Since we have no legacy technology in these areas none of our effort is focused on protecting existing executive turf or legacy products. There are few if any internal conflicts and that makes every part of the acquired company important. Much of our initial work is to determine, later protect, and eventually enhance the value of what we have acquired. This is systematic and repeatable process that we first implemented with EqualLogic and Dave Johnson, who joined the firm later, has been instrumental in making this into a process we have repeated since.
Using EqualLogic as an example we were able to grow their 3,000 customers to over 50,000. This established a process where we start with a successful company and rather than the more typical process that other firms use of blowing the acquisition up in order to integrate it in existing legacy lines we attach the company to Dell resources which act like a huge business booster. The end result is our acquisitions increase in value dramatically while other approaches generally have the opposite effect.
The acquired companies like this as well because without us they typically have 4 bad choices either they can’t grow fast enough to compete with larger competitors and fail, never grow to critical mass and fail, get acquired by someone else that destroys everything they painstakingly built, or maybe after a long period of time they make the cut to success. We fast track them to this last most favorable alternative and that is why our retention of both employees and top executives from these firms is so high.
In the end while others seem to prioritize integration we prioritize preserving and enhancing value which is why we are so much more successful preserving and enhancing value. We simply believe that making something better trumps taking absolute control of it.
On the coming Annual Analyst Conference
Question: The Dell Annual Analyst Conference is coming up. What should the analyst community expect from Dell since the last conference?
Answer: They should expect a massive change from the desktop focused Dell of the past. Our solutions portfolio, particularly in the mid-market, has grown substantially and our ability to provide complete solutions from client, to security, to management, to back end processing, to storage, to networking, has increased dramatically.
We are now a company with the most advanced market tested technologies in a number of critical IT segments and expect that we’ll provide proof points that will demonstrate that leadership. We are nothing like we once were and we are very proud of the changes we have made.
We’ll show them a Dell that is now a full service provider, one that has unique solutions that lead our industry and segment, and one that is uniquely able to address tomorrow’s problems with tomorrow’s technology both now and in the future.
We aren’t planning on being the next anyone else; we are planning on making everyone else want to be the next us.
Wrapping up:
I’ve known Michael Dell for a number of years but this is the only time I’ve actually interviewed him. This conversation reflects the unique advantage of a founder more interested in building strategically than focusing exclusively on short term quarterly results. His ability to acquire companies and increase their value remains relatively unique this decade and his approach to acquisitions has become an industry best practice that most other firms seem unable to emulate.
What generally makes a founder different is the ability to create and execute a long term vision. In our conversation Michael Dell demonstrated this unique ability which likely will remain as one of Dell’s greatest assets.
