On Apr. 3, as part of BusinessWeek's continuing "Captains of Industry" series with the 92nd Street Y in New York, Dell Computer Corp. (DELL) CEO Michael S. Dell sat down with Editor-in-Chief Stephen B. Shepard to talk about Dell and the changing PC business. Excerpts:
Q: How is the tech slump affecting your business?
A: If the overall market were growing faster, we would have an opportunity to grow at a faster rate. I think it affects much more the companies that are operating with less efficient business systems. In our last quarter, we had 43% growth in units. That was 4.5 times the rate of the market growth. All the data that we have so far for this year would indicate that we're growing significantly faster than the market.
Q: How do you motivate employees at this time?
A: A year ago people would say, "O.K., now we're going to go work for washmycar.com," and all sorts of crazy businesses that were being invented. What we see now is a more normal business environment: People appreciate being employed. They appreciate the fact that they have salary and benefits and incentive compensation plans that actually pay, and bonus plans and profit sharing plans that are funded based on the success of the business.
Q: Did we get caught up in the romance of technology a little bit too much?
A: The new technology still has a tremendous opportunity to change businesses. The change will be more profound for existing businesses, not necessarily new businesses. A year ago, customers were scrambling to figure out how they were going to deal with their dot-com competitors. Now what they are thinking about is, "How do I drive productivity? How do I get my supply chain to be more efficient? How do we link our customers?" Just fundamental, blocking-and-tackling, roll-up-your-sleeves kind of work that has very clear and tangible benefits in the P&L and in the balance sheet.
Q: Where do you see future growth coming from?
A: The biggest opportunity for us is in the server and storage markets, which are midway through the commoditization that has occurred in desktops and notebooks. Then there's globalization. We have about 22% share in 45% of the market. We have only 5% in the other 55% of the market. So there's a big opportunity to grow outside of the top four or five countries in the world.
Q: Do you see making Net appliances or set-top boxes?
A: I wouldn't rule out any product category, although so far those products have been more technologies in search of a customer than large markets. The concept of the Internet appliance has been an economic disaster. Nobody has purchased them.
Q: What do you think of predictions that PCs are going the way of the dinosaur?
A: There is a shift from fixed computers to mobile computers that is quite pronounced. As we get wireless networks and the next-generation cellular systems that are higher-speed, those networks allow us to take our computers anywhere. But remember, the PC is a device that is sold to the tune of 150 million units a year. Now, will it change form? Definitely, but I don't think it's going away anytime soon.
Q: Many companies have decreased in value tremendously. Is Dell interested in acquiring in order to expand and diversify? Pick 'em up cheap, in other words.
A: Just because it's cheap doesn't mean it's good. Almost all of our growth has come with organic activity as opposed to acquisition. I truly believe that will continue to be our major source of growth. We're acquiring our competitors, one customer at a time. Not to say that we wouldn't consider [acquisitions] as a path for continuing expansion, but we're not spending a lot of time thinking about it.
Q: What is the future of Apple Computer?
A: Silicon Graphics.
Q: That bad?
A: Maybe it's a little bit different. But if you look at proprietary computer companies, whether it's Digital or Silicon Graphics (SGI) or Apple (AAPL), I think the fates are all relatively similar. We know how the movie ends. It's just a question of what happens in the middle. Apple has a very little customer base. If you look at the economics, it has been extremely hard for Apple to get a return on its R&D with a shrinking volume base. It's not to say that Apple's products aren't innovative or cool, but the economic factors here are so overwhelming, it's very hard for them to swim against that tide.
Q: If you were running Apple, is there anything you could do to change that?
A: I would never take that job.
Q: You're 36 years old. Do you expect to be CEO of Dell for the next 25 years?
A: I think I've got at least another good 25 years left. I feel I've got a fantastic job and there is plenty of room for me and the company to grow. So I'm staying right where I am.