After a couple of days in Austin being hosted by
You might ask, “Why not?” since it hardly matters what the financial figures are. No one can trade on them anyway. And yet, not having to report is a competitive advantage. If Dell lowers its pricing, rivals such as
Over the course of two days, through presentations by founder and CEO Michael Dell, his many minions, and longtime stalwarts like Vice Chairman Jeff Clarke as well as by product and segment managers, during conversations over dinner and drinks and formal one-on-one discussions, several themes emerged that clearly demarcate Dell history into distinct eras: BP and AP (before and after going private).
Aside from the already well-observed change in Michael Dell’s demeanor (he’s much more relaxed than when Wall Street was breathing down his neck), the company seems to have attained a new, more vigorous stride. Although numbers that the company released were mostly relative (e.g., some business is growing at 3x the rate that it was before), in the room one could feel a palpable sense of renewed momentum.
IDC figures reflect Dell’s market share growth in PCs over the past five quarters, and this share gain is accelerating. And while we’re talking about PCs — which have been much pooh-poohed in recent years as markets for other form factors, notably smartphones (in the form of first
“Why is this?” you might ask, and there are many reasons, but one of them is structural: PCs are still used for most real work (and most people still have to work for a living). Another is transient:
And Dell is right there to harvest its share (and then some) of this revived market. Jeff Clarke was practically strutting as he described from the main stage the company’s strengthening position in various countries, product categories, and customer segments. The company passed out tie-dyed “Keep Austin Weird” T-shirts to everyone, and Clarke was wearing his, along with a fine pair of cowboy boots, which made his strutting all-the-more emphatic.
But it wasn’t just management. Employees at all levels seemed focused and energized. Sweet talked about being released from “the 90-day cycle” and being able to enjoy a “longer-term time horizon for paybacks” on investments. He noted that R&D investment had risen at the company from 1.6% to 2.1% of revenue year on year, as Dell focused on building the business rather than having to meet artificial profit expectations. He also said the company reduced its debt, piled up during the go-private transaction, by $1 billion in the first quarter of this year. So, cash flow is pretty good. And Sweet is still looking to reduce operating expenses by another $3 billion, which the company will use to both maintain price positioning in existing markets and make further investments in new ones.
There were a few financial analysts at the event. Not as many as when the firm was public, but its bonds are still traded, and Wall Street remains interested in its performance. Those waiting for it to go public again, though, may have to wait awhile. Dell is making money, taking share, getting out from under its debt, and enjoying the freedom to make decisions without being second-guessed by equities traders.
And here we are 700 words in, and I haven’t even started talking about all the new areas in which Dell is investing and establishing or consolidating its position: post-PC areas like tablets (both Windows and Android), enterprise solutions like converged datacenter products, OEM relationships with companies like Google,
The company did show future products in a “whisper suite,” the only part of the show under non-disclosure. So, I can’t say much, but what I can say is innovation is alive and well at Dell. Development will continue on both organic and inorganic fronts; that is, Dell will both fund internal development and buy and invest in more companies to gain intellectual property that will help it fill out its portfolio of products and services. In this regard, software is a big focus, as Dell ramps up its capabilities in an attempt to match more-established enterprise suppliers like
As with any prediction, Dell’s future still has plenty of uncertainty. A lot can happen between the spoon and the lip. But the firm gives off an aura of having turned a corner. It has a broad portfolio of enterprise solutions and consumer and commercial endpoints, its people are motivated, and its financial house is looking fairly orderly.
I’d say the stock is a buy. Oh wait. No it’s not.
