Michael Dell’s love/hate channel relationship

Had it been produced by MTV, it would have been billed as “”Michael Dell: Unplugged.””

Dell Computer Corp. invited some international media to its headquarters this week to get to know the company a little better. On paper the

most intriguing part of the two-day trip was a Q&A with Dell and his collaborator of almost 10 years Kevin Rollins, president and COO.

Unlike many a concert, the event matched the anticipation. For an hour in his boardroom on Wednesday, Dell sat in a director-style chair and answered any and all questions.

 

Dell fell from the top spot in terms of PC sales in the fourth quarter. Is this a sign of things to come?

Michael Dell: We have a smaller consumer business and in the fourth quarter there’s a large portion of consumers. But I think perhaps the most important way to look at it is to see what the absolute growth levels were for both companies. If you look at the last nine quarters in a row you’d see Dell has grown at a premium of 20 per cent or more faster than the market. I’m not too worried about the statistic of one quarter.

 

How do you decide what markets to break into?

MD: What Kevin and I have found is that we make better decisions when we put our heads together. As is often the case, I might have an idea and Kevin is thinking about that as well and we wait until we both have an agreement on what the right way for us to proceed is. But we usually come up with a better answer by developing the ideas together. We’ve been working together now for almost 10 years.

 

Are you stretching the company thin by moving into storage, PDAs, etc.?

MD: You could look at many times in our history and you could’ve said the same thing. You could say, “”Well, Dell’s at the height of its game and Dell is biting off more than it can chew.”” I’m not sure it’s an easy statement to make about a company that’s growing.

We do worry about that, and we try to find the right time or the right products where we’re really going to make an impact and bring something that’s valuable to the customer. We’re not going after every opportunity we see.

 

What are your company-wide goals?

MD: We’ve talked about doubling the size of the company.

 

How?

MD: It comes from a variety of areas: certainly enterprise servers and storage plays a key role, services, global expansion, growing our market share in software and peripherals.

 

Can you share goals in terms of numbers?

The reason I can’t is that we have a lot of lawyers in this country. They take those statements to be official projections and that is somehow exploited by the legal system in a way that is not very comfortable for us.

 

Do you plan on increasing your R&D spend?

MD: What we are better at doing is partnering with those companies that bring the ingredients that go into a solution. Look at our R&D. We spend US$500 million in R&D. We have 800 patents by the U.S. Patent and Trademark Office. There are 3,000 people developing the products, developing technology for us. Could we spend more? Sure we could spend more, but we think it would it be wasted because we would be re-inventing things from our partners and our suppliers.

There’s the notion in the industry that the more you spend on R&D the better it is for customers. Let’s say you spent 100 per cent of your revenue on R&D, would that be good for customers? Your product would be very, very expensive.

There’s no shortage of innovation in our industry. You go to CeBit or to Comdex or any trade show, you walk around there’s more technology. There’s technology for the sake of technology; there’s technology in search of a problem.

 

What are your plans for the white box business?

MD: There are no plans for white boxes outside the United States right now. It’s an experiment and we’re still in the experiment stage.

 

Has your view of the role resellers play in your business model changed as you’ve moved into higher end equipment?

MD: No. We believe that direct relationships are the basis of our business. There are certain partners whether it’s software developers, software integrators, professional services companies. We also have a business where our product is embedded into complex applications. So there are plenty of roles for partners, but I think the traditional reseller, where there’s a markup on the product, we’ve not seen a role for that in Dell’s strategy. In fact, you can see they’re kind of going away. That reseller model is, in the United States at least and other parts of the world, starting to shrink and evaporate.

Comment: info@itbusiness.ca

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