THE FRIDAY INTERVIEW:Michael Dell, founder and CEO of Dell
MICHAEL DELL, the eponymous founder of computer maker Dell, is in top form as he bounds into a meeting room in his company’s south Dublin offices. A question about the reason for his visit to Ireland – he spent the day before in Limerick – is greeted with a response about how great Dell is doing both locally and internationally.
“It’s really fantastic to see the transformation of our activities here. It’s really a microcosm of the broader transformation at Dell. The team has been enjoying a lot of success and it’s been showing up in our results, our improving financial results and higher profitability, great cash flow.
“Our business is really doing well in a pretty challenging world these days.”
The “transformation” Dell refers to included a dark day for Limerick in January 2009 when 1,900 staff were let go as the PC maker moved its manufacturing to a lower cost facility in the Polish city of Lodz.
Dell is on his first visit to Ireland since that decision was made. While of little comfort to former production line workers whose skills have no place in Dell’s new vision of “solutions, services and data centres”, the Texan company has actually added staff in Ireland since 2009.
Last June, it announced another 150 posts with the establishment of a cloud computing research and development centre at Cherrywood in Dublin and the expansion of its “solutions centre” in Limerick. Employment now stands at 2,300 between the two sites.
Coming straight from a meeting with an Irish bank which is a customer, Dell says that discussion illustrates how the company has morphed from simply selling computers more cheaply and efficiently than the competition.
“When we would go to talk to them five or 10 years ago, we would say well we have this box and that box, and they are shiny and they do this and that. They’d say ‘that’s nice, we need some shiny boxes, thank you very much, see you later’.
“Now we’ve changed the conversation to really understand what challenge the bank has. What are they trying to accomplish? And what solutions do they need to go and do that?
“That takes more skills, it takes a focus on the vertical types of activities that go on inside the bank or financial institution, and so we’ve transformed the business in a pretty significant way.”
Dell remains passionate though about the personal computer. He founded PCs Limited in his University of Texas dorm room in 1984 with $1,000 in capital, becoming a millionaire four years later when it floated on the Nasdaq stock exchange as Dell Inc.
Dell, both the company and the individual, are big fans of social media tools like Twitter and Facebook. When rival HP (which overtook Dell as the world’s biggest PC maker when its founder was on a three-year hiatus as chief executive) recently announced it would sell or spin off its PC division, he launched a stinging attack on his competitor.
“Hardware still matters. It’s the frontline of how you access the IT. Software’s great, we like software. Services are great, we’re doing lots of software and services. But infrastructure and hardware still matters and we’re very happy to be in the PC business. It’s not the only business we are in, right?” he asked.
“[That’s] in stark contrast to one of our competitors who said ‘forget about all that, we were only kidding, we don’t care about that’, we do.”
Would Dell consider buying its rival’s PC business? “I don’t think they’ll find a buyer for it. I think they’ll spin it off.”
While Dell has expanded the scope of what it does with business customers, it has been reducing the amount of products it sells to consumers. Under Kevin Rollins, the former management consultant who took the reins from 2004 to 2007 and who Dell cryptically refers to as “my old buddy Kevin”, Dell started selling everything from games consoles to TVs. “The IT industry is a $3 trillion industry. Our strategy is not to try and sell everything to everyone, everywhere.”
He points out that Dell’s consumer business – which accounted for $2.9 billion of total revenues of $15.7 billion in the second quarter – has been profitable for three quarters in a row. “The business is doing much better, with a different focus.”
Michael Dell’s career – a young company founder who was replaced as chief executive by a more “professional” manager, but who took back control to get the firm back on track – has been compared to that of former Apple chief executive Steve Jobs.
Jobs recently stepped down for health reasons but his second coming at Apple saw its stock price soar. In contrast, Dell’s shares languish below $15, having been as high as $30 in 2007. Does he worry about the stock price?
“This year our shares are outperforming the market, but if I look at our share price and I look at the earnings of the company, I’d say there’s opportunity. So what do you do? Anything you could do in the short term is not the right thing to be doing. And so we don’t do those things.
“One thing you could do is buy back your own stock and we’ve been doing that. We’ve been reducing the number of shares pretty dramatically.”
On the day we meet, Dell’s board earmarked $5 billion of its $16.2 billion cash pile to buy its own shares. Last year, Dell admitted he had thought about taking the company private but when the subject was raised, he was unequivocal. “We have no plans to take the company private,” he said.
In the meantime, he is focused on transforming Dell from a low margin provider of hardware to a more profitable supplier of services.
“If I look at our results in the first half of this year we have record earnings, we have record cash flow, record gross margins. We have made a fairly substantial transformation of the business. These are not things you do because of short-term reaction.
“I don’t really worry about the short-term reaction. We’re focused on the transformation and building a much more valuable company that has a much more significant role in the IT industry. This year Dell will have its highest ever earnings and cash flow by a significant amount.”
Although clearly more comfortable talking about technology, Dell doesn’t pull any punches when it comes to the intersection of politics and business. Despite being a Republican, he is dismissive of talk of jobs being brought back to the US from overseas or that companies like Dell should pay more corporation tax in their home territory.
“We have some folks [in the US] who don’t really understand how the global economy works. Unfortunately some of them are in important positions in our government. Part of my job is to explain how the global economy actually works.”
Although Dell stepped back from an executive role before to become chairman, he claims to be happy back in the driving seat.
“I’m 46 years old, in pretty good health,” he said. “I have the fundamental belief that technology is the fulcrum of progress in the world and that gets me tremendously excited. It’s not like a chore that I dread doing. It’s fun.
“There are some things that are more fun than others, but I always get excited when I am with our customers, when I am around products, around strategy.”
Although Dell’s Limerick factories once made it Ireland’s largest exporter, they ultimately proved to be a dispensable cog in the global Dell machine. Was he surprised at the level of reaction in Ireland to the closure and aware of the impact on the midwest?
He pauses for consideration before answering.
“What I would say is when I fast forward to today, we can be incredibly proud not only of the way our team transitioned but of the ultimate effect in terms of results, for our customers, for our communities.
“The path forward and the outlook that we have in our business in Ireland has never been brighter. We’re very proud of the fact that we made it through that transition to this point where we can say we have an incredibly successful, growing operation that we are expanding. I couldn’t be happier with where we are today.”
ON THE RECORD
Name: Michael Dell
Position: Founder, chairman and chief executive of Dell
Age: 46
Family: Married with four children
Lives: Austin, Texas
Hobbies: Cycling and "hanging out with my wife and four kids – that keeps me pretty busy"
Why he is in the news: Dell made his first visit to Ireland this week since the company closed its manufacturing operations in Limerick in January 2009 with the loss of 1,900 jobs
