Good morning, Kemble.
This interview with M. Dell has another great quote for your collection. When asked about the success of his business and whether or not he is getting bored with it all, M. Dell responds, "I think we are almost getting to the fun part." I LOVE IT....
On Wednesday, August 19, 1998 Dell Computer's Chairman Michael Dell sat down for private interview with KVUE 24 Anchor Walt Maciborski. The interview was an Austin television exclusive. Portions of the discussion were shown on that evening's KVUE 24 News at Ten as part of Walt's continuing series of reports on Austin's high technology. Here, in it's entirety, is the transcript of Walt Maciborski's discussion with Michael Dell. For the latest in Austin techology, tune to KVUE 24 News every Tuesday night for Walt's "Click Here on Tuesday" special report.
QUESTION (WALT):
First of all congratulations, earnings are up, revenues are up. How do you sustain that type of growth?
ANSWER (DELL):
Dell has about 8 percent of the world's PC market. Which on the surface is really not very much and if you look at the opportunities we have ahead, I think we have a continued opportunity to grow
faster than the market. You know, we've had the same question now for several years and what we've been doing by selecting the best opportunities and executing on them quite well by organizing our
business and having teams that can deploy again against these opportunities we've been able to grow much faster than the market. So if I look at the consumer market,the notebook, the workstation,
the server, the storage market, the transition of customers from indirect to direct, growth in our geographies in Europe. We're just opening this week a new manufacturing plant in China. We're looking now at South America. We see a lot of opportunities ahead. So, we're feeling pretty good about the opportunity to grow faster than the market.
QUESTION (WALT):
Another amazing part of this earnings report, people are getting killed in Asia. The PC makers have been getting softer sales because PC's are coming down in price and you guys are showing revenues are going up in Asia.
ANSWER (DELL):
Well, it's no different than anywhere else in the world. We're gaining share. Now, if you look at Dell's growth in Asia, compared to the other markets, its certainly slower, but the difference between the
markets growth and Dell's growth is pretty consistent. In other words, the same economic phenomenon exists in China as does in Cincinnati and everywhere else in the world. So the advantage Dell has is an economic one. It is global. It's applicable all over the world. Not only are
we growing faster than the markets in Asia, but we're growing profitably and we're expanding. So we see those as attractive markets. You know one of things that happens when the market gets more
competitive is that customers look for economic ways to save money. And guess what? That attracts them to Dell.
QUESTION (WALT):
Two for one (stock) split. I heard a lot of rumors about a possible three for one split. Was that ever talked about or is that ever an option down the road?
ANSWER (DELL):
Well, our board considers these issues from time to time obviously. We have traditionally done two for one splits. This is now our sixth split in six years. I think the strategy we've been following has
been one that has rewarded both our shareholders, employees and certainly our customers as well and we're pretty comfortable with the approach we're taking.
QUESTION (WALT):
The Internet, how is that playing into Dell's success?
ANSWER (DELL):
Well, think about it this way. You've got two million people. Two million visitors every week coming to our Web site. If you imagine the
infrastructure you'd have to establish on a retail basis and
remember that our competitors are primarily driven by a physical structure. We have a really profound advantage and its driving about 6 million dollars a day in revenues. We're seeing a consistent increase in the number of visitors. We also think that support, in other words, customers E-mailing us for support information or going on-line for
support is a great application of the Internet. We have something called Webtalk, which allows Dell users to interact with each other. We now have about 50-thousand Dell customers who registered and signed up to use Webtalk. We also have an automated E-mail response system that's able to handle a lot of basic inquiries instantaneously without human intervention. Certainly, we've got lots of technical support people for more complex problems. But that's really the point, we want our human force to move up to higher levels of value add. And, whenever we can use automation to drive productivity, that's going to help us drive our cost structure lower. The Internet is probably a
great example of what you see happening in Dell where we have not the lowest cost structure in the industry, and as you pointed out, the highest growth, but we also have the highest profitability.
QUESTION (WALT):
YOUR COMPETITORS ARE MOVING INTO THE SERVICE MARKETS. IS DELL THINKING ABOUT GOING INTO THE SERVICE BUSINESS?
ANSWER (DELL):
Well, you know, it's almost like we are going in 180 degrees different directions. Dell's moving its service model to the Internet in automated, non-labor intensive fashion, and our competitor
acquired a company with 55 thousand employees who are primarily field based service - which is really more of a traditional, old way of doing service - and I really like that equation - that sounds
like a good way to compete to me and I'm real excited about that.
QUESTION (WALT):
DELL IS THE NUMBER ONE SELLER OF DESKTOPS IN THE U.S. AND NUMBER TWO IN EUROPE?
ANSWER (DELL):
That's correct. well actually we're number one in desktops in the United States. We're number two over all in the world. In the U.S. we're basically in a dead heat with Compaq, and in Europe we're
number two. We have a lot room to grow. In notebooks we're number three, in servers we're number two in the United States, but we're number four in the world. You jump down to a market like Japan
- which is the second largest market in the world - we're number seven and number eight. China is a brand new market. We have very little share in China, and it's a rapidly growing market, So we see a
lot of opportunity.
QUESTION (WALT):
YOU'RE 33-YEARS-OLD, YOUR BUSINESS IS PROBABLY MORE SUCCESSFUL THAN YOUR WILDEST DREAMS. IS THIS STILL EXCITING FOR YOU? ARE STARTING TO GET BORED WITH IT AT ALL?
ANSWER (DELL):
I think we are almost getting to the fun part. if you think about the opportunity to lead an industry and to take computing to the level of availability and pervasiveness in our world similar to other
technology products . If you think about the calculator, the television, or the telephone before it - I think computing and communications are going to combine together to really revolutionize the way the world functions. There are about 300-million PC's installed in the world today. I'm pretty convinced there'll be about 1.4 billion 10 years from now, and if I think about the opportunity for our company to grow with the best and smartest way to sell these products, to gain a significant amount of that share that occurs in the next 10 years - that's a very compelling opportunity, so a lot of
excitement headed for us.
QUESTION (WALT):
HOW MUCH OF THE WORLD MARKET IS UNTAPPED WHEN IT COMES TO COMPUTER USE AT HOME AND IN THE WORKPLACE?
ANSWER (DELL):
Well you've got seven-billion people and 300-million computers, so you've got actually very low penetration. You can correlate the usage of computers to the cost of labor and you can see that first-world countries like the United States computer usage is much higher than in other markets. You have about two and one-half or three people to every one PC. Interestingly,if you go to Europe you see that the economy in Europe is actually about the same size as the U.S., but there's half the number of PC's. What that tells me is they've got to catch up at some point. The companies in Germany and France and U.K., Italy can't compete with global companies if they're not using the
weapons of modern economics - and in fact they are catching up. The Germans are saying - we've got to computerize our businesses, and growth rates in Europe are staggering. We have five countries in Europe growing greater than 100 percent last year, and so that itself is a major market. Then you go over to Asia where you have two-thirds of the world's population, and you don't need a lot of penetration to start to get pretty big numbers. If we look at the curves that have followed for telephones or cellular telephones or other products, this leads us to believe that its going to be a very robust growth environment for us.
QUESTION (WALT):
ARE THERE ANY MARKETS THAT ARE SATURATED WHERE THERE ARE NO
OPPORTUNITIES?
ANSWER (DELL):
Saturation - you can look at that in two ways. In the corporate market - sure - everybody has a PC, however they also replace them every three years. How would you like a business where the product
is replaced every three years. I don't think of that as a saturated market - I think of that as a replacement market. upgrades, latest technology - think about it this way, about 10 percent of the
installed base of computers are based on Pentium II, yet virtually everything we are selling today is Pentium II, so if you want to run the latest software you want to run windows NT 5.0 -- which is
coming out fairly soon. you want to run office 2000, you've got to have the latest hardware to be able to run the latest software.
QUESTION (WALT):
HOW DOES AUSTIN FIT INTO DELL'S FUTURE AND CONTINUED SUCCESS?
ANSWER (DELL):
Austin's really been wonderful for dell, and we continue to invest heavily and expand here. We have a virtual non-stop construction operation for Dell. we've got the server work-station plant going up on Parmer Lane. We've got a whole research and development center up on 1325 in North Austin...South Round Rock... depending on how you want to characterize that. And then just on the other side of our Round Rock campus we're building additional sales and support operations. We're hiring several hundred people a week still in Austin, and growth continues at a rapid pace.
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