Speeches

Michael Dell spent a week in Japan at the end of March during which time he met with customers, business leaders, government officials, employees and the media and discussed topics ranging from virtualization to recycling and innovation. Excerpts from Michael's remarks and Q&A sessions at various events are transcribed below.

General Comments:

Michael Dell:  I would like to spend a few minutes talking about how Dell is using IT to help customers be more productive, be more efficient, and be more competitive, and how IT can create disruptive value for customers.

Now certainly this is a challenging economic environment. And the events that have occurred have now reached really all parts of the world economy, with the credit crunch affecting businesses and consumers of all types, really everywhere in the world.  The challenge in the banking environment is a key one that impacts every sort of business, and what we see our customers doing generally is deferring purchases, and delaying purchases, and also focusing on things that really deliver enormous value and they're putting off discretionary purchases, focusing on things that can deliver immediate and tangible savings.

For us, when customers delay purchases, it reminds us of a critical thing about our industry, and that is that we have to continually provide new sources of productivity and efficiency to cause customers to want to purchase the next generation of technology.  And so that increases the need for innovation inside our products to cause people to want to go to the next generation.

So let's talk a little bit about what this means to customers.  They are deferring spending, and I think it means that customers are going to move faster to things that deliver productivity like virtualization.  Virtualization is a fantastic technology.  We're seeing customers in a broad way want to consolidate large numbers of servers.  Virtualization has started in the server platform, it's moved into storage.  We're also seeing client virtualization, and network virtualization.  All of these are very disruptive in terms of the value that customers can derive from that kind of virtualization, and is a big, big area of focus for Dell.

So I think that what you're going to see are really three themes for IT in the future.  The first is, I think you're going to see continual adoption of standardized technology in the IT infrastructure.  The second is, I think you're going to see IT being used to unlock lots of innovation inside businesses of all types.  And the third I think you're going to see a focus on green technology, and power savings in energy efficiency as a major driver of the next generation of IT.

"Standardization is always very important, but the value it can provide is especially important in these times of economic uncertainty." Michael Dell

So first, we help customers deliver standardized IT environments.  Dell has always been a leader in embracing standards, and it's interesting to reflect on today's server market, for example, and think what would it be like if Dell had not entered the server market as aggressively as we did.  You might have the 20th generation of the VAX servers, or IBM System 48, or other such things dominating the server infrastructure, and maybe you wouldn't have so many people on the Internet as you have today, as Dell was a major force in driving the cost of servers down, and making IT more affordable for these customers.

What we also see is that complexity continues to be a major issue.  In a recent IDC survey conducted in Asia Pacific and Japan, 66 percent of CIOs said that complexity was among the top three challenges.  And so for us the focus is on reducing the cost of ownership, reducing the ease of deployment, speeding deployment, and maximizing how people can utilize these resources.  So I think standardization is always very important, but the value it can provide is especially important in these times of economic uncertainty.  I think customers will accelerate the movement from proprietary platforms, and you see certain other companies with proprietary platforms struggling now because customers are going to move more rapidly away from those.

Today, in fact, we are unveiling 14 new enterprise products around the Intel Nehalem architecture, our 11th Generation Enterprise Architecture, and a wide range of services across our server, storage, and enterprise datacenter portfolio to help customers create these next generation datacenters of the future.
 

One of the other interesting aspects of disrupting or changing an industry is around design.  And we recently introduced the Adamo 13, which is the world's thinnest laptop.  This has an exceptional design, fit and finish, it's an aluminum infrastructure, and really a fantastic design that we'd love to share with you.  And for our consumer business, which last year had unit growth of 34 percent, we're seeing customers really very excited to see this kind of product come to market, and you'll see a continual wave of new product, and new designs from Dell that are very innovative.

So next, on the Green Data Center, I think you will see green throughout.  Dell has been a leader in environmental policies, and strategies from materials, to recycling, to reducing energy consumption inside our products.  Our blade platform delivers performance per watt which is between 25 and 29 percent better than our two leading competitors.  We've led the transition to LED displays on our notebooks.  We've been the first company to be carbon neutral in the IT industry of scale, and we're still the only IT provider to provide free recycling to customers worldwide.  And actually if you go to Dell.com/earth, you can get a sense for all of these initiatives.  You also see the kind of savings that we have delivered for our customers with 31, almost 32 million tons of CO2 emissions avoided with new energy efficient products, and over $3.3 billion in energy cost savings for customers.  So in the United States, the money is green, whether you like green the environment or green the money, we are building the kind of products that are saving customers in both ways.

Now for Dell, the direct model has always given us a tremendous contact with customers, and listening to customers has been fundamental to our business.  There are nearly 95 million people today online in Japan.  It represents almost 75 percent of the population.  But in the world today there are still almost 500,000 people coming online every day for the first time in their lives.  This creates enormous opportunities for us in our server and storage, and in the entire IT ecosystem, and we've made it a priority to listen to those customers and provide products that meet their needs, not only for the client, but also for the server and the storage that is required to support all those new users.

And to better serve our customers, we have now organized the company into four global business units, each focused on the major types of customers we serve.  So we have a large enterprise business, which is the biggest business within Dell.  This is almost a $17 billion business, where we serve the largest companies in the world.  The public sector business includes governments, education, healthcare, medical, it's about a $15 billion business.  The small and medium business is about a $15 billion business also.  And the consumer business for Dell is about a $12 billion business.  So you can see the majority of our business is with business and institutional customers, but we are also serving a wide range of customers throughout our business.  Each of these businesses is by itself a very, very large business on the scale of a Fortune 200 size company.

Just turning to the last year's financial results, which we announced around the end of February, Dell had revenues of about $61 billion, which gives us the third highest revenues in the IT sector of companies.  We had operating income of $3.6 billion.  And you see some pretty exceptional growth in certain parts of our business.

In APJ we had 21 percent unit growth, which was much faster than the industry.  The rest of the industry grew only 6 percent.  In the BRIC countries we had 34 percent growth.  And in our consumer business we had 35 percent unit growth.  Dell is a strong company.  We have $9.5 billion in cash and investments, and very, very little debt.  So we are in a very different position than some of the companies that are challenged in today's environment.  And last year we had cash flow from operations of almost $2 billion. So, we have a very strong balance sheet.

In Japan, just reflecting on our business, we have a long history, starting actually going back to the late 1980s, where we established our original Far East procurement office here, and then set up the business 15 years ago in Japan.  It's been a large and growing business.  We're the number one provider of iSCSI storage, number two in overall shipments in Japan.  In the last 18 months we have expanded to over 1,000 retail outlets, as the consumer part of our business has been growing, and we've also created a new customer innovation center in Tokyo, to introduce customers to the more complex solutions that Dell can provide.

Our business in China grew in units by 28 percent, yet the rest of the industry only grew by 7 percent.  So, you can see that we grew four times the rate of the overall industry in China.  We've recently celebrated our 10th anniversary in China, and China is the second largest country in the world for Dell to sell its products, and of course a very important market for us.

We're the number two provider of commercial PCs in China.  We have a global design center in Shanghai, which is the largest R&D center in the world of Dell outside of our headquarters.

Last year, we spent $23 billion U.S. in China, and that would make us one of the largest purchasers of electronic equipment and goods in China, and one of the largest exporters.   And, of course, with the expansion of our strategy into the consumer retail business, we have more than 3,000 locations across China where Dell products are now available. 

And our actions also bring out the culture and define the type of company we are here in China.  Our teams have participated in volunteer activities in China, as we do everywhere in the world, with employees donating close to 8,000 hours of their time here in China for public and community projects.  We're also donating about 13 million RMB to youth-related initiatives, and we're going to be rolling out a very exciting initiative called Youth Connect here in China later this year.

On Dell’s Consumer Business:

Michael Dell:  First, if you look at our consumer business, its' the area where we have the lowest share.  And so we see it as an area of growth for us.  And as I mentioned last year we had 35 percent growth, which was much faster than the industry.  I think what it comes down to for us is, first of all, if we have low share, we can grow quickly.  So while I'm here, I’ll  be meeting with major retail companies, major partners, and we see a lot of opportunity to grow the business with those partners, but also grow the direct business through Dell.com.

What it also comes down to on the product side is we have to, as a product company, provide a reason to buy a new product.  We can't just show up with a product and say, well, now it's time to buy.  We have to accumulate enough features and enough attractive difference from the old product that causes a customer to buy.

So what could that be?  Well, that could be Windows 7.  It could be 3G radio built in.  It could be 3D capability on the screen.  It could be touch screen.  It could be thin and light.  It could be a new, super-thin design.  Many, many features accumulate over time, and that's really our responsibility.  But with our share position, and expanding into global retailers as we have, starting from 18 months ago, I think we can grow our consumer business again this year.  In fact, in the first quarter we are growing consumer quite nicely much faster than the industry.  So I think our policy for expansion in the consumer business continues to show success.

On Cloud Computing:

Michael Dell:   In terms of cloud computing, we have been providing the infrastructure to many of the largest cloud environments, I would say if you think about the cloud computing it really started in consumer-driven services, and is now moving its way into small-medium business, and large business, but with large business it has a different flavor, which I'll describe in a minute.  But, for the smaller customers the consumer, you have services like Yahoo, and Google, and Baidu, and Microsoft, Facebook, many, many others.  Those are the major customers for Dell in providing ‑‑ where we provide the server and storage infrastructure for cloud.  So we have a focused business unit called Data Center Custom Solutions, DCS, that builds cloud infrastructure environments just for those types of customers.

What we see happening with larger customers are essentially the creation of private clouds.  Larger customers have more complex IT environments, and they have their own applications with very confidential and valuable data.  And they're not really interested in putting their information into a public cloud.  So we have been creating private clouds, pools of virtualized servers that are connected together in large numbers with partners like VMware, and that's been a major, major strategy that you see starting with financial institutions, but now going into all types of companies, all types of large companies.

On Adamo:

Michael Dell:  Adamo is a product that we've been working on for quite some time.  It's true that there are more customers focused on value today, but there's always a high-end market, and there's always a demand for a beautiful product that is exceptionally well-designed, and has kind of breakthrough features and performance and quality.

The target for this product is really the fashion-conscious user who demands the very best in engineering and design.  So this would be the customer who is buying other luxury goods in their life, whether it's a designer watch, or other kind of the best products that you can buy in any category.  That's really what Adamo represents for the high-end consumer.  Of course, we have a broad range of consumer products from the entry level to mid, to high-end, to gaming, to ultra-luxury products, a very broad range.

On Netbooks:

Michael Dell:  I think the netbook is going to continue to grow.  I think there are also some other interesting categories, thinner and lighter machines is definitely the trend.  And as you get more connectivity built into these machines, you know, that means that there will be more online services.  The move to smaller screen, you know, you have to think about that somewhat carefully because we like to consume information in a visual way.  If the screen is too small, you can't see as much information.  This is why the original netbooks that were seven-inch or eight-inch didn't do nearly as well as the 10-inch, or even 11-inch, or 12-inch.  So I think you'll see a variety of products, perhaps it's 20 percent of volume, something like that, for consumers.  But I think it's really important to integrate 3G radios in those, and you'll see a wide range of products from Dell.  We, of course, already have 10-inch models in Japan, and many additional models planned over the course of this year.  We're working also very closely with carriers to integrate 3G service.