What Happened To Dell?

Dell turns 35 this year and the company is bigger than ever. Over its long history, Dell has grown from a PC maker to a technology conglomerate generating revenues of more than $90 billion 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 I used to have. That was a Dell. I knew about Dell computer phones since I was younger. So, they're like the first brand of computers I discovered. Many friends used Dell computers. I'm thinking about fairly reliable computers. What do you think Dell is doing today?

Do you know anything about

what

they are currently doing? I have no idea

what

Dell is currently doing with his life. I don't think I know anything else about other things. They not only make computers, but they also make other things. Probably like, huh. Like tablets. Maybe one or two phones that I don't really know. Maybe vacuum cleaners? When customers first hear the word Dell, they probably think of PC. And it's a very interesting question because we really believe that brand and technology are very important and that the best technology companies have a word in the customer's mind.

Google owns the search, Intel owns the microprocessor. The fact that Dell was founded as a PC company means that it's probably still the first thing on people's minds. Now, the company is not called Dell PCs, it is called Dell Technologies and Michael emphasizes that today it is a very different and much broader company than it has been. We want to introduce you to the child prodigy tonight. A special young man in a hurry. His name is Michael Dell and he is so smart and energetic that he has done more in a couple of years than most of us could even dream of doing in his entire life.

Dell's story begins in the dorm room of a 19-year-old first-year medical student at the University of Texas. The year is 1984 and Michael Dell works in his bedroom making and selling custom 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 originally set Dell apart was its ability to play with other big companies in the tech world. So Dell was kind of an open source company, I guess you could say, in the sense that it came with kind of a Microsoft operating system and then several different semiconductor companies inside.

So you could customize your PC in ways you couldn't with, say, Apple hardware, which has always been a more closed-source system. Another thing that sets PC's Limited apart is that you can 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. In 1985, PC's Limited released its first computer, the Turbo PC, which sold for just under $800. By comparison, the first personal Macintosh cost about $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 million. Dell's stock price continued to grow, and in 1992, Michael Dell became the youngest CEO on the Fortune 500. Then, in 1996, Dell began selling PCs online. The move helped the company surpass Compaq as the world's largest PC seller in 2001. In 2003, the company changed its name again to Dell Inc as it sought to expand beyond PCs into the broader electronics market. of consumption. Michael Dell literally made a name for himself with built-to-order personal computers. But now his company has many new names. Manufacturer of flat screen televisions, manufacturer of digital music players, manufacturer of printers and seller of servers.

Whats Next? A powerhouse in consumer electronics? I would buy Dell and just keep it. They have the most amazing business model I have ever seen. But Dell's hot streak didn't last forever. In 2013, demand for personal computers was stagnating thanks to the growing popularity of tablets and smartphones. This is a declining business. They sell PCs. More than 70 percent of its revenue comes from PCs, laptops or PC-related peripherals. More than 70 percent? We estimate that more than 70 percent. Over the last decade, Dell stock is down, I think, about 80 percent. 50 percent. 50 percent. The S&P is up 80 percent. The computer hardware index is up 200 percent.

If Dell wanted to survive, it needed to change its strategy. The company went private in 2013. We began a transformation in 2008, beginning to transition from a traditional hardware provider to a full-fledged solutions provider. And when we got to 2013, the market and perceptions of the tech industry were changing. Certainly, there was the mantra that the PC was dead and that the cloud would be where data center workloads would take place. And we're at a point where we needed to transform the company, fix some 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 some changes. They invested more in research and development. They invested in sales and services, and made acquisitions, particularly the very important acquisition of EMC, which brought with it VMware, which is proving very important in the new cloud era. Basically what VMware does is a virtualization company. Let's say that in the '90s, your desk was your desk. In other words, you owned a PC, you put things on your desktop, they lived on the hard drive of that desktop. That is no longer the case. You can log in to your cloud desktop in several 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 that his company was considering a number of strategic options to provide its private shareholders with a way to monetize his investment. It ultimately decided to become 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 largely become a sort of end-to-end technology company and that was one of the reasons Dell recently decided it wanted to get back into the public markets because it felt like there was an investor appetite, especially among the majors. companies. , institutional hedge fund investors into owning a big tech company with a really broad base.

Because, frankly, there aren't many more of those. Dell was a $20-$25 billion company until it made a big deal buying EMC. That deal was approximately $60 billion, and remains the largest technology transaction to date. And it turned Dell into a much bigger company. Today Dell has revenues of more than $90 billion a year. But along with this injection of new income came debt. When Dell announced it was going public again, the company was more than $50 billion in debt, largely thanks to its costly acquisition of EMC. And despite all its investments in data storage, Dell's latest SEC filing shows that the bulk of its revenue, about 47.7 percent, came from the Client Solutions Group.

This includes things like desktop computers, laptops, 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 accounted for about 10 percent of revenue and the rest, 1.8 percent, came from Dell's other businesses. Dell's biggest source of income today is definitely hardware. Now, VMware owns 80 percent and that is a very important source of income today. It is the highest margin business. But in dollar terms, it would be the hardware businesses. Dell's main objective is no longer the consumer. It is largely enterprise software and hardware.

In other words, Dell is selling to businesses, so it's not only selling PCs to businesses and monitors and printers on the hardware side, but it's also selling software packages, servers, and networking. and sell storage for data centers. Last year, we added more than $11 billion in revenue. So that was further industry consolidation for you. Look, I think customers have told us very clearly that they no longer want to be systems integrators and that they are 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 clients.

They prefer to work with a leading company than with 20 or 30 smaller companies. In 2018, Dell EMC tied with HP as the top server manufacturer in the United States. Each held 16 percent of the cloud server market estimated to be worth $86 billion. From a cloud services point of view, your main competitors in the world of virtual machines will be companies like Microsoft, Salesforce, Workday and other large cloud software companies. From an enterprise hardware point of view, it will be Cisco, Juniper, Ericsson and Oracle. And from a consumer PC and printer standpoint, it will be HP, Lenovo, and Apple. But today it's hard for me to find a company that really competes against Dell at full speed because Dell is a very diversified technology company.

Some of the challenges Dell faces going forward include the size of the company. Managing a company of that size is very difficult. The company, aside from VMware, is largely a local company, meaning it sells to traditional data centers. They do not sell to Amazon or Microsoft Azure in the cloud. That business could potentially decline over time. A third risk would be the debt burden. You generally don't like to see a lot of debt in technology companies because there is a lot of operational risk, so you don't want to accumulate too much financial risk. I think it's very manageable under normal circumstances, but if the economy goes into recession and they start having trouble paying down debt, investors will worry.

But despite its ups and downs, there has always been one investor who has been willing to back Dell. I think having a long-term perspective and a long-term time horizon that no one approaches the development of a company could be a big help. And, you know, last year we had over $91 billion in revenue. I started the company with $1,000 in my bedroom and it worked out pretty well. So, you know, I'm the best long-term investor. As we think about the competitive landscape going forward, we believe we have a very differentiated set of assets in the market. We have the largest direct sales force on the market.

We have an unmatched global services organization. We have a supply chain with scale advantages. We have a global financial arm to help our clients. We believe that these seven strategically aligned businesses, the distinctive collection of assets that the company has, put us in a unique position to help our customers with digital transformation from edge to core to cloud in a very, very different way. shape.