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. 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.
