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Michael Dell: Still Betting on the Future of Online Commerce and Supply Chain Efficiencies

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Knowledge@Wharton: This is a fairly challenging time for you and the company. Your second quarter earnings are down, your stock price is down and there is the recent recall [of defective laptop batteries] that Apple is now facing... See more » Knowledge@Wharton: This is a fairly challenging time for you and the company. Your second quarter earnings are down, your stock price is down and there is the recent recall [of defective laptop batteries] that Apple is now facing as well. Do you believe that Wall Street views you differently as a result of all this? Dell: I think as we look at our business, certainly there are challenges that we have. It's important to recognize a little bit of perspective on what's happened in our company, particularly in the last 10 years. Ten years ago, this was a $5 billion business; now it's a $56-to-$57 billion business. So, a lot of changes have occurred in 10 years. When you ask about Wall Street, I think there are many Wall Streets. There are the short-term traders, there are the long-term investors, there are people who really own the stock and then there are people who buy and sell it seven or eight times a year. What we are concerned about, as owners of the company, is doing the things that are going to create value over a long period of time. Knowledge@Wharton: Given the situation that you are faced with today, where do you see the opportunities for growth? Dell: If you look at our second quarter results, we actually had the number-one market share in the small computer systems industry -- servers, work stations, PCs, notebooks -- any computer that sells for under $100,000. We have the highest share that we have ever achieved in that category in our history. If you look more closely, what you see is there are certain markets that are growing at very rapid rates for us. We grew at 37% in China. We grew at 82% in India. We grew at 87% in Brazil. We grew at 78% in Mexico. Generally speaking, Dell is, in the United States, larger and more profitable than the next three competitors combined. Yet outside the United States, we have about 11% to 12% share. So what we have is a lot of space internationally to grow. We also have great opportunities in services. Services is a vast new land for us in terms of growth and expansion. Today, we are concentrating on infrastructure services. If we were doing this interview in 5 or 10 years, I think that we would be talking about many other services as well. But today, [we are focusing on] infrastructure services in the form of migration, deployment and managed services, where we will manage the entire life cycle of the client environment for a large company or an institution [including] ... installation, training, asset management and, of course, maintenance. Dell is the largest provider of hardware maintenance services for computers in the United States. So services is a big area of growth for us also. Knowledge@Wharton: A lot of companies are focusing on the BRIC [Brazil, Russia, India and China] economies. While you have grown in China and in India, these are highly competitive markets. How do you take on someone like Lenovo in China or HP in India? What's your competitive strategy in those markets? Dell: If we look at China, we're at a little bit of a different stage than where we are in India. In China, we're number one in the server market for the country. We have a large and nicely profitable business -- quite a bit more profitable than all of the competitors that you have mentioned. It's running at over a $2 billion run rate for us. I think that if you look at our model of building relationships with customers, which is quite different than setting up dealers, there is a gestation cycle to do that. In other words, you don't just show up in a country, then all of a sudden have 50% of the market. If you look at all the countries that we have entered and you compare our progression of growth and share in those countries, what you see is that almost all of them are exceeding the curve that the United States was on when we started here in the U.S. China is a stand out example of a country where we have grown faster and further than anyone would have expected. Japan is an interesting kind of retrospective, because when we started in Japan in late 1992, the conventional wisdom was, "Well, See less »

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Michael Dell: Still Betting on the Future of Online Commerce and Supply Chain Efficiencies

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