Dell: Direct, as Always

Dell Computer founder and CEO continues to seek opportunities to offer standard wares at low cost.

While much of the IT industry has been struggling in the midst of a protracted recession, Dell Computer Corp. has prospered, recently posting a 22 percent increase in quarterly revenues. Dells business model—making standard products and selling them directly—has remained constant, although the company is pursuing new initiatives, such as IT services, printers and handheld devices.

Michael Dell, chairman and CEO, answered questions about these directions and other issues in an interview with eWeek Editor in Chief Eric Lundquist, Executive Editor Stan Gibson and Senior Editor Ken Popovich at Dell headquarters in Round Rock, Texas.

eWeek: With so many new initiatives, is Dell at a turning point? Three years from now, will Dell be quite different from how it was three years ago?

Dell: At any three-year interval in our 18-year history, you could have made that statement. Lets go back to 1995, when we were just getting into the server business. A lot of people said that was not going to work. Obviously, it did work. Whats the logical follow-on? Storage, services and networking. Weve been in switching now for a little over a year, and weve shipped 1.8 million switch ports. Less than half of our profit comes from desktop computers now, so the company is fundamentally quite different from the way it was in the early 1990s. Are we changing faster than we were three or six years ago? I dont believe so. Sorry.

eWeek: What services are you shooting for?

Dell: Not application development services but more like SAN [storage area network] implementation, same-day service and things like that, where were able to drive the cost down. I really believe in the notion of semicustom services. On our Web site, if you click on Professional Services, youll see things like [Microsoft Corp.s] Active Directory, SharePoint and Exchange. These are things that are repeatable.

eWeek: Is pressure from financial analysts to always grow revenue a reason for you to sell your own printers now?

Dell: In todays economy, we have a lot to be proud of. So, if we didnt do all these things [such as printers], wed still be growing really fast. We have a business model that applies to a lot of technologies. And about one out of two computers at 90 percent of large corporations in America are Dell. So we have a lot of customers. Why not sell them the other things as well? But we know theres opportunity there. If you ask why now, you might also ask why didnt we do it 10 years ago. Maybe we should have.

eWeek: Last year at Comdex, we asked you about [personal digital assistants], and your answer was, "Wheres the standard?" One year later, things are still not standardized, are they?

Dell: No, but it looks fairly clear that a large portion of the market will buy Pocket PCs.

eWeek: Does that fundamental value gap—the difference between what you know you can build the units for and what the price is—exist for Pocket PCs?

Dell: Oh, you betcha.

eWeek: What do you think about the Tablet PC?

Dell: Were doing some pilots with a partner in health care [accounts]. Were trying to understand what the demand is. Id rather not say more than that.

eWeek: What are your thoughts on 64-bit migration with regard to the Intel [Corp.] Itanium and the Advanced Micro Devices [Inc.] Opteron?

Dell: This is a raging debate. But I dont see the products competing as much as they might at first appear. Itanium is much better positioned for servers with large databases. AMDs product may be a great product, but to date, customers have not broadly embraced AMD in a server environment. Even in the business desktop, you dont see a lot of AMD. That could change.

Were looking at [AMDs] technology. If the question is, "Are we going to use AMD as the main platform for servers?" I dont see that happening soon. But its still early in the life cycle of that product.

eWeek: The other raging debate is over open-source software, such as Linux. Whats your position?

Dell: If we see customer demand, thats where we go. There are quite a few customers moving from Unix to Linux, in financial services and manufacturing, especially.

eWeek: You make EMC [Corp.]s low-end devices. Will you make higher-end equipment?

Dell: Thats a decision well make together with EMC. We announced the CX600, a pretty high-end product.

eWeek: Could you take over all manufacturing from EMC?

Dell: Our relationship is progressing and involves mutual discussion. What they decide to do with their manufacturing, obviously, is their decision.

eWeek: Where are you heading with switches?

Dell: Were at Layer 2 right now, and well be going into Layer 3 next year along with rack solutions and chassis-based solutions. Well continue to move up the switch architecture.

eWeek: Is there any future technology thats not getting enough attention?

Dell: Clusters. Theres a lot of interest at universities and at commercial organizations. Clustering is a democratization of supercomputer power. In three to five years, that could be the form that supercomputing takes.

eWeek: Some analysts say your own continued involvement is critical to Dells success. How do you respond?

Dell: First, [President and Chief Operating Officer] Kevin Rollins. Ive worked very closely with him for the past 10 years, so Im not the only guy driving the success of the company. Second, Im 37 years old. Im not planning on going anywhere; Im having a great time.

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