Dell turns 35 this year and the company is bigger than ever.
Throughout its long history, Dell has transformed from a PC maker to a technology
conglomerate that brings in revenue of over $90 billion dollars a year.
But Dell's reputation may be stuck in the past.
The first thing I think of when I hear Dell is my old purple computer that I used to have.
That was a Dell.
I knew about Dell computers phone from when I was younger.
So, they are like the first brand of computers that I found out about.
A lot of friends used Dell computers.
I'm thinking quite reliable computers.
What do you think that Dell is up to today?
Do you know anything about what they're doing currently
I have no idea what Dell is currently doing with their life.
I don't think I know about any other stuff.
They don't only make computers, but they make other stuff.
Probably like, huh.
Like tablets.
Maybe one or two phones that I don't really know about.
Maybe vacuums?
When customers first hear the word Dell, they probably think PCs.
And it's a very interesting question because we actually believe branding and technology
is very important and that the best technology companies own a word in the customer's
mind. Google owns search, Intel owns microprocessor.
The fact that Dell was founded as a PC company means that that's probably still the first
thing that people think of.
Now, the company is not called Dell PCs, it's called Dell Technologies and Michael's
emphasize that it's a much different, much broader company today than it's been.
We want to introduce you tonight to the whiz kid.
A special young man in a hurry.
His name is Michael Dell and he is so smart and so energetic that he's done more in a
couple of years than most of us could even dream of doing in a lifetime.
The story of Dell begins in the dorm room of a 19-year-old premed freshman at the
University of Texas.
The year is 1984 and Michael Dell is working out of his dorm room making and selling
customized personal computers.
He has called his company PC's Limited.
That same year, Apple released the first Macintosh personal computer.
One of the things that set Dell apart originally was their ability to play with other big
companies in the tech world.
So Dell was, sort of, a more, I guess you could say, open source company in that it came
with sort of a Microsoft operating system and then various different semiconductor
companies inside.
So you could customize and personalize your PC in ways that you could not do, with say,
Apple's hardware, which has always been a more closed-source system.
Another thing that set PC's Limited Computers apart is that you could order them over the
phone. This allowed the company to keep inventory low and offer competitive prices.
Michael Dell never became a doctor.
He dropped out of college at the end of his freshman year to devote time to his growing
business. By 1985, PC's Limited came out with its first computer, the Turbo PC, which
sold for just under $800.
By comparison, the first personal Macintosh cost close to $2,500.
Three years later, PC's Limited changed its name to Dell Computer Corp and went public at
$8.50 per share.
At the time, Dell had a market capitalization of $85 millon.
Dell's stock price kept growing, and by 1992, Michael Dell became the youngest CEO on the
Fortune 500 list.
Then in 1996, Dell began selling PCs online.
The move helped the company overtake Compaq as the largest seller of PCs in the world in
2001.
In 2003, the company again changed its name to Dell Inc as it looked to expand beyond PCs
to a broader consumer electronics market.
Michael Dell literally made a name for himself with built-to-order personal computers.
But now, his company has lots of new names.
Flat panel TV maker, digital music player manufacturer, printer builder, server seller.
What's next?
Consumer electronics powerhouse?
I would buy Dell and I would just hold it.
They have the most amazing business model I've ever seen.
But Dell's hot streak didn't last forever.
By 2013, demand for personal computers was stalling thanks to the rising popularity of
tablets and smartphones.
This is a declining business.
They sell PCs.
Over 70 percent of their revenue are PCs, notebooks, or PC-related peripherals.
Over 70 percent?
Over 70 percent, we estimate.
In the last decade, Dell stock is down, I believe, something like 80 percent.
50 percent.
S&P is up 80 percent.
The computer hardware index is up 200 percent.
If Dell was going to survive, it needed to change up its strategy.
The company went private in 2013.
We had started a transformation in 2008 beginning to transition from being a traditional
hardware provider to being a full-fledged solutions provider.
And by the time we got to 2013, the market and the perceptions of the tech industry were
changing. Certainly there was a mantra that the PC was dead and that the cloud was going
to be where data center workloads were going to be conducted.
And we're at a point where we needed to transform the company , fix a few things along
the way, and continue that transformation from being a traditional hardware provider to
being an end-to-end solutions provider for our customer.
When Dell went private, they made a few changes.
They invested more in research and development.
They invested in sales and service, and they made acquisitions, in particular, the very
large acquisition of EMC, which brought with it VMware, which is turning out to be very
important in the new cloud era.
Basically what VMware does is it's a virtualization company.
So say back in the 90s, your desktop was your desktop.
In other words, you owned a PC, you put things on your desktop, they lived on the hard
drive on that desktop.
That's not the case anymore.
You can log into your desktop on the cloud in a number of different ways.
Your phone.
Your computer.
Well that virtualization, the virtual desktop, that's the type of software that VMware
makes.
In 2018, Michael Dell announced his company was considering a number of strategic options
to give its private shareholders a way to monetize their investment.
He ultimately decided on becoming a public company through an unusual maneuver:
exchanging Dell's private shares for a publicly traded tracking stock it owned as a
result of the EMC deal.
Dell has become very much a sort of full end-to-end technology company and that was one of
the reasons that Dell very recently decided they want to get back into the public markets
because they felt like there was an investor appetite particularly among the large,
hedge-fundy, institutional investors in owning a really broad-based, large , technology
company. Because frankly, there just aren't that many more of those.
Dell was about a $20-$25 billion dollar company until it made a huge transaction buying
EMC. That deal was about a $60 billion deal, still the largest tech transaction to date.
And it made Dell a much larger company.
Today Dell has revenue of more than $90 billion per year.
But along with this injection of new revenue, came debt.
Around the time that Dell announced it was going public again, the company had over $50
billion in debt, in large part thanks to its pricey acquisition of EMC.
And despite all of its investments in data storage, Dell's latest SEC filing shows thst
the largest chunk of its revenue, about 47.7
percent, came from the Client Solutions Group.
This includes things like desktop PCs, notebooks, monitors, and some software products.
About 40.5
percent, the second largest revenue, came from Dell's Infrastructure Solutions Group,
which includes storage, servers, data protection, and networking.
VMware made up about 10 percent of revenue, and the rest, 1.8
percent, was from Dell's other businesses.
Dell's biggest earner today is definitely hardware.
Now VM ware they own 80 percent of and that's a very significant earner today.
It's the highest margin business.
But in terms of dollars, it would be the hardware businesses.
Dell's main focus really isn't the consumer anymore.
It's very much enterprise software and hardware.
In other words, Dell is selling to businesses so they're selling not only PCs to
businesses and monitors and printers on the hardware side, but they're also selling
software packages, and they're selling servers, and they're selling networking, and
they're selling storage for data centers.
Last year, we added more than $11 billion in revenue.
So that was some additional industry consolidation there for you.
Look, I think, customers have told us very clearly they don't want to be systems
integrators anymore and they're looking for fewer partners and bringing together a broad
set of capabilities across the infrastructure.
Security, client devices, the cloud, digital transformation, enabling all
those capabilities for customers.
They'd much rather work with one leading company than 20 or 30 smaller ones.
In 2018, Dell EMC tied with HP as the top server manufacturer in the United States.
Each held 16 percent of a cloud server market that was estimated to be worth $86 billion
dollars.
From a cloud services standpoint, their main competitors in the VM ware world are gonna be
companies like Microsoft, and Salesforce, and Workday, and other large cloud software
companies. From the enterprise hardware standpoint, it's going to be Cisco, and Juniper,
and Ericsson, and Oracle.
And from the consumer PC and printers standpoint, it will be HP, and Lenovo, and Apple.
But it's hard for me to come up with a company these days that really competes against
Dell on all cylinders because Dell is such a diversified tech company.
Some of the challenges Dell has going forward include size of the company.
Just managing a company of that size is very difficult.
The company aside from VMware is largely an on-premise company, meaning they're selling
to traditional data centers.
They are not selling to Amazon and Microsoft Azure in the cloud.
That business over time potentially could decline.
A third risk would be the debt load.
You generally don't like to see a lot of debt on technology companies because there's a
lot of operating risk so you don't want to layer on too much financial risk.
I think it's very manageable under normal circumstances but if the economy goes into
recession and they start to have some trouble paying back the debt investors are going to
be concerned.
But through its ups and downs, there's always been one investor that's been willing to
back Dell.
I think having a long-term perspective and long-term time horizon with which no one
approaches the development of a company could be very helpful.
And, you know, last year we had over $91 billion dollars in revenues.
I started the company with $1,000 in my dorm room and it's worked out pretty well.
So, I'm you know, the ultimate long-term investor.
As we think about the competitive landscape going forward, we think we have a very
differentiated set of assets in the marketplace.
We have the largest direct sales force in the marketplace.
We have a unmatched global services organization.
We have an at-scale advantage supply chain.
We have a global financing arm to help our customers.
We think this seven strategically-aligned businesses, the distinct collection of assets
that the company has puts, us in a very unique position to help our customers with
digital transformation from the edge, to the core, to the cloud in a very, very different
way.