Of all the priorities that confront the head of a $40-billion-a-year company, the biggest for Michael Dell is leading his company into an even broader interpretation of the mass-market customization model for which it's known.
When Dell Inc. changed its name from the more-limiting Dell Computer Corp. six months ago, it was symbolic of the company's desire to move beyond its heritage as a vendor of Intel-based hardware and software. Dell is reselling Lexmark printers, Kodak and Fuji Xerox imaging equipment, a wide range of Samsung monitors, and a variety of storage devices, as well as technical services, that are combined into customized packages with its own products. "We've got a pretty broad array of technology products to bring to the marketplace," CEO and chairman Dell says.
Dell is optimistic about the future. "The U.S. economy has a lot better feel to it," he says.
Photo by Kim Kulish
Yet Dell is forced to consider competition from a resurgent Hewlett-Packard, which appears to have merged successfully with Compaq and is listed by research firm IDC as No. 1 in PC sales in the fourth quarter. HP had 16.9% global market share for PC shipments to Dell's 16.3%, IDC says.
Dell says he's not worried. The fourth-quarter figures favor the biggest producer of PCs to consumers because of the holiday season. Eighty-two percent of Dell's revenue comes from selling computers to businesses. Dell also argues that just because his staunchest competitor boasted the greatest number of units shipped in the most recent quarter, that's not necessarily a barometer of financial health. Dells says he's focusing on profit margins, not how many PCs are going out the door. It does no good to "ship a lot of products, but not make any profit doing so," he says. "That's not rational behavior."
Another thing going for the company is its success selling four-processor Intel servers, which increasingly are replacing proprietary hardware. Clusters of Intel-based Dell servers are even replacing heavy-duty supercomputers and mainframes in universities and research labs. "Without question you will see industry-standard computers move up in the enterprise and capture a greater share of revenue," Dell predicts.
Dell says he's confident that 2004 will see an upturn in the business economy, and the uptick in PC sales in the fourth quarter that reflected consumer spending is just the beginning. Companies will start expanding their IT budgets, albeit by what he thinks will be a modest 2%, but perhaps even more.
And Dell scoffs at that bandied-about phrase, "jobless recovery." The loss of jobs was a natural outcome of the bad economy, he says, and more jobs will become available as the economy improves. "When you have a big correction in the stock market, and 'whatever.com' goes out of business, that means a jobs correction. It isn't really surprising," he says. As for any danger of sliding backward into recession, "It doesn't feel that way," Dell says. "The U.S. economy has a lot better feel to it. We just have to get the rest of the world to participate in the recovery."
Still, Dell admits that If he has one worry, it's the continued bad health of many companies in the computer industry. "I look at the results; a lot of companies are shipping a lot of product, but they're not making any money," he says. "It's a problem for the industry. We're not one of them."
Dell found itself at the center of the offshore outsourcing controversy in recent months amid reports that the company was sending more customer support offshore. But CEO Dell says that what the company has done isn't anything new or surprising; he runs a global, growing company, and that means global operations will continue to grow. "Most of our support for any given country is in that country," he says. True, Dell continues to add personnel to technical support centers in India and Asia, but it also added several thousand technical-support people to its centers in the United States, which included staffing a 24-by-7 enterprise technical-support center that it opened in Austin, Texas, in late 2003. "This is a control center to track and resolve any issue that a large enterprise may have," he says.
In cases where offshore support people help U.S. customers, Dell says it's a priority for the company to make sure that support is adequate. "Our goal is to improve the capability of our people, wherever they are in the world," he says.
Dell says he expects annual revenue for the fiscal year ended Jan. 31 to be up about 10% to $40 billion. If all goes as planned, the upturn will continue. By fiscal 2006, Dell predicts he'll be heading a $60 billion company.