Dells Mood-o-Meter on the Rise

Michael Dell's mood meter moves into the "feeling good" zone-and with good reason, as he gears for the "Delling" of the technology industry.

On Wednesday, the day before Dell Computer announced its latest quarterly results, I was at the companys Round Rock, Texas, headquarters for a series of technology briefings when Michael himself stopped by. Having interviewed the companys namesake several times over the years, by now I think Im getting pretty good at judging the health of the company by the founders mood during an interview. If I was stock smarter and ethics free I might have thrown a few bucks toward Dell shares in the stock market, for the Dell mood meter was as firmly planted in the "feeling good" zone as Ive seen.

And the reasons for those good feelings were born out the next day. As Jeff Burt reports, Dell showed a strong fiscal showing especially against the general economic gloom. Dell ended a strong fiscal year with a fourth quarter that saw income, revenue and shipments all jump at least 21 percent.

For the quarter ended Jan. 31, the computer maker earned $603 million—a 32 percent increase over the same period last year—on more than $9.7 billion in revenue. That represented a 21 percent increase over the $8.06 billion in revenue during the fourth quarter last year.

And there are other reasons for that good feeling despite widespread misgivings about the health of the PC market, an economy that resembles the 90-pound weakling in the old Charles Atlas ads and a new use for duct tape (having it on hand in case of a terrorist dirty bomb attack) that is most simply put: depressing.

The computer industry has been Delled. A big chunk of the network business is due to be Delled, as is storage, maybe printers and possibly services. While it is no mean feat to have a business process named in your honor (even if it is just by us writers), being able to take that process beyond the original confines into other industry segments may be a singular achievement. It would be a bit like McDonalds taking its one-food-fits-all philosophy into the auto industry. More about what it means to get Delled later, but first the Michael mood-o-meter.

Just down the street from Dells headquarters is the local sprawling mall containing the obligatory Wal-Mart.

"Michael," I asked, "have you ever gone to the Wal-Mart to check out those cheap Lindows systems?"

"Ive been to the Wal-Mart, but Ive never checked out the Lindows systems," he said. He doubted that anyone save a few consumers—but no corporate customers—would find the low-price boxes to be anything but a headache once they tried to set up and run the systems. For now Id put his interest in the low-end Linux area at about the same bottom of the seabed level as his interest in Tablet PCs. Hes probably right on that one.

Where the company hopes to do its most Delling using Linux is in the high-performance area, where as Dell contends, "Linux is the new Unix." The combination of industrial-strength Linux, Dell boxes and Intel chips is causing lots of problems for Sun Microsystems, which is at risk of seeing its best customers defect to the Dell model. The Dell/Intel/Linux (DIL?) model also doesnt leave much room at that high-end segment for the third member of the Dell trio—Microsoft. And ever since Microsofts "Scalability Day" event years ago, Microsoft has craved getting a solid chunk of the high-performance business.

Does Dells embrace of Linux make those breakfast meetings with Bill Gates resemble more a Texas standoff than a San Francisco lovefest? Michael danced around that one a bit, saying Dell works with Microsoft in many, many areas but is also determined to give its customers what they ask for. "Its all about competing." Id mark Dells capability to lead with products such as Linux for high-availability servers rather than just be seen as an assembler of Microsoft software and Intel chips as the point where the company really came into its own and Michael Dell took on an equal seating at the table with the likes of Gates, Oracles Larry Ellison and the remainder of the techno elite. It was that confidence that I thought was more in evidence than Id seen in the past, and the main reason I nudged the mood-o-meter up a couple of notches.

So, what does it mean for an industry to get Delled? First you need an industry led by vendors all offering proprietary products while at the same time extolling the benefits of standards. Of course, what they often mean by standards is their proprietary offerings turned into industry standards. When standards (either real or de facto) do get adopted, the market becomes one of great opportunity. But rather than take advantage of the opportunity, the older vendors get locked into protecting their installed base instead of taking on new business. The winners become those able to perfect the manufacturing process, provide service without adding costs to their business, and develop products that amplify—rather than depart from—the standards.

The networking business, storage and just about all of the computing industry are currently in that stage. That does not mean that Dell will be victorious in all those segments, and there is no reason that Dell could not be out-Delled itself, but it does define the turf where the battle will be fought. And its the reason why Michael Dell can feel confident about the future.

"Were doing well," Dell said when asked how the company is shaping up for 2003, adding, "Im confident we can outgrow the market at a very strong rate."

If hes right, the Delling of the technology industry will spread far beyond its current Round Rock confines.