Dell Shares : Retail

Review of Dell's 2009 Analyst Meeting

Robert L Williams — Tue, 14 Jul 2009 19:00:00 GMT

Today more than 200 participants, including analysts and investors, joined us in Austin for Dell's Analyst meeting. There were also a record breaking number of webcast attendees for this meeting, where we broke our record of 400, rising to nearly 500 participants. This meeting was an opportunity to hear directly from Dell's senior leadership on our near-term operating agenda and long-term strategy and address questions or concerns. The presentations from this meeting are available for viewing online,

This year, the meeting and briefings took place the same day. Dell executives discussed the company's strategy and operating agenda along with a financial overview and update on its four customer segments.

We are competing in a rapidly changing environment. As a result, we are improving our core business performance while expanding and extending across a broader set of customer solutions. Key messages delivered today were Dell's differentiated view of how to win in enterprise, our strategic mission "to provide disruptively great value to our customers", and that both these items will be realized through a combination of internal investments, partnerships and inorganic growth.

The meeting was opened by Michael Dell, Chairman of the Board and CEO, where he discussed Dell's key assets, view on the enterprise, and long-term priorities. Michael noted that Dell has a strong presence and currently holds #1 or #2 share position in most key segments. He also covered strategic priorities to deliver operating income and cash flow growth as well as the requirements needed to win longer-term.

Brian Gladden, CFO, followed and built on striking the optimal balance between liquidity, profitability and growth. Brian reviewed Dell's operating agenda, gave an update on the solid progress on $4B cost reductions, and provided a long-term value creation framework that articulated Dell's vision for revenue growth, profitability and cash flow generation. He also stated that Dell is well positioned to benefit from an economic recovery and will continue to provide strong liquidity.

Steve Schuckenbrock, President of Large Enterprise, walked us through our higher-value & higher-margin enterprise vision which addresses innovation and virtualization in next-generation data centers vs. our competitors' full-stack approach. He also reviewed how Dell is delivering steady growth in its core business while powering enterprise efficiency through innovation without legacy. For example, we approach services very differently from our competitors. We believe services should be customizable, a la carte, and available remotely. We let customers choose which services they want and when they want them. And we provide solutions where consultants are available - but not required.

Paul Bell, President of Public Sector business, addressed how Dell is aligning its global organization for balanced geographic expansion via vertical solutions designed for three unique customer bases -Education, Government, and Healthcare. Paul mentioned the challenges in this segment due to the macro environment, but also highlighted opportunities that exist internationally as well as those related to stimulus funds. Requirements needed to win in the Public sector include deep expertise in the sector-specific challenges, solutions investments, technology leadership, and solid partnerships.

Steve Felice, President of Small & Medium Business, presented Dell's plans to lead in the SMB space through innovative solutions and its go-to-market strategy. Steve reviewed the varied needs across the customer base of Small Businesses and Medium Businesses as well as regional opportunities to grow the business. He highlighted the solutions and product offerings that will help drive growth in each of these areas along with the benefits offered through SMB's go-to-market strategy. Having a multi-channel strategy will enable Dell to expand presence in under-represented geographies and drive incremental growth in enterprises and solutions.

Ron Garriques, President of Dell's Consumer Group, walked through consumer's brand architecture, its multi-channel customer portfolio and how it's bringing a disruptive approach to PCs. Dell grew to 33,000 retail stores globally in two years. Clearly, there is a lot of opportunity to continue to grow in this retail space. Ron reviewed Consumer's plan to grow faster than the industry through aggressively managing costs to reflect the multi-channel infrastructure, expanding global presence, and offering competitive products. He also reviewed plans to reinvigorate Dell.com to create a destination for all customers.

If you haven't already seen the presentations, I encourage you to watch a replay of them here.

As always, we welcome any questions or comments.

-Rob

Comments on the Netbook Effect

Robert L Williams — Wed, 29 Apr 2009 18:52:00 GMT

The netbook is a product category that has received considerable attention over the past several months from the media and investment community, so I wanted to share Dell's point of view on it. We see this relatively new product as another category of the notebook market and one that is growing rapidly. In Dell's case, the Inspiron Mini line is an excellent way for us to continue down the path of expanding the number of product platforms designed around specific customer needs and cost points. As for the opportunity, Wall Street analysts estimate netbooks may reach 20 to 30 million units in calendar 2009 while IDC expects total notebook units for 2009 to be approximately 148 million on a worldwide basis. Thus, netbooks are certainly a meaningful and growing part of the overall notebook market with the potential to represent 13 to 20% of total notebook units shipped worldwide this year. Revenue and profit share will be lower given the lower average selling prices for netbooks.

Dell entered this category last fall and currently offers three products in the "netbook" segment in 9, 10 and 12-inch screen sizes. Consistent with Dell's overall consumer approach to differentiate based on industrial design as well as specific functionality in each price point, the Mini line-up is stylish and packed with solid mobility features including integrated 3G mobile broadband connectivity. Dell has also established key cellular broadband partnerships in North America and Western Europe and recently announced a deal in which China Mobile will offer 3G broadband on the Mini 10 inch netbook in China.

We view netbooks as incremental to conventional notebooks with some differences in usage by mature and emerging geographies. In mature markets, we believe netbooks will principally function as secondary devices. People looking for basic email, web access and social networking functions may favor the small screen sizes, keyboards and lower power footprint. They also serve as an excellent travel companion device for those who are highly mobile and looking for a smaller form factor on the road. However, a traditional notebook is generally a better option for consumers looking to perform functions such as photo and video editing or use productivity software applications such as Office. In emerging markets we believe that many first-time and value conscious users may be attracted to netbooks as they offer basic functionality at an attractive price point. Netbook usage may find its way into other areas besides consumer, such as schools and education. Though this may act to reduce overall hardware average selling prices, it also presents an excellent opportunity to increase the addressable industry opportunity and raise margins through attached services, software, etc.

Overall, there are different usage models and applications that will drive people towards different sized devices and technologies. This is a quickly evolving space that will see the introduction of more powerful and more efficient processors from the likes of Intel, so we will watch this play out. Regardless of where these technology improvements take us, Dell's direct relationships with its customers, allow us to deliver what customers want and take them where they want to go with the proper features, whether it is mobile broadband, keyboard configuration, screen size, etc. The growth in this space looks to outpace that of traditional notebooks over the next several years, and Dell will be a part of that growth.

Meet Us At The World Money Show in Orlando

Robert L Williams — Wed, 04 Feb 2009 23:40:00 GMT

Starting today and through Saturday, we are attending The World Money Show in Orlando, Florida - one of several annual conferences that provide a venue for individual investors to learn more about best practices of investing and financial planning. This year, The World Money Show will feature more than 300 workshops and 150 speakers with an opportunity to hear leading experts talk about the global economy, investments and personal finance. It is a great way for you to learn via panels and workshops in addition to interacting with company representatives and investor relations professionals.

So why are we attending this event? Individual investors own roughly 20% of Dell and this is one of many opportunities for us to meet directly with you - our current and potential shareholders. We are fully committed to our retail shareholder program and believe it is especially important during times of economic uncertainty and market volatility to reinforce the face-to-face relationship we have with our individual investors.

Prior to this event, we also attended three individual investor conferences last year - The World Money Show Orlando in February, The Better Investing National Convention in Schaumburg in June and the Money Show in Washington DC in November. We will also be attending The Better Investing National Convention in Atlanta in June of 2009.

At this event, we will be at booth #303 in the Exhibit Hall of the Gaylord Palms Resort and Convention Center in Kissimmee, Florida, today through Saturday. We hope you will stop by and check out our booth!

3Q Earnings - Executive Q&A

Lynn Tyson — Thu, 20 Nov 2008 21:05:00 GMT

Chairman and CEO Michael Dell and CFO Brian Gladden Discuss Dell Q3 Fiscal Year 2009 Performance Dell announced third-quarter fiscal-year 2009 financial results on Nov. 20. Michael Dell , chairman and CEO, and Brian Gladden , discuss the results and the...(read more)

1Q Earnings – Growing at a Premium to the Industry

Robert L Williams — Thu, 29 May 2008 15:18:00 GMT

All comparisons are year-over-year unless otherwise noted. Industry growth rates exclude Dell.

We announced Q1 results today. Revenue was up 9% to $16.1 billion on 22% unit growth. EPS were up 12% to $0.38 per share and cash from operations was $143 million and $4.2 billion on a trailing four quarters basis. We encourage investors to read the full press release and earnings presentation; and listen to a replay of our conference call that can be found on the investor relations web site after the earnings call.

A year ago we made a conscious decision to reignite growth, and our results this quarter demonstrate we're making progress. For the first time in several quarters, Dell is growing faster than the industry in all major product categories and regions. In the U.S. we grew 16% vs. flat industry growth. In APJ we grew 43% vs. industry growth of 14%. BRIC revenues were up 58% on a 73% increase in units. And, Global Consumer revenues were up 20% and units were up 47% as we continue to move into retail. These results reflect the strength of the Dell brand worldwide, and our ability to deliver the products customers want in the regions where they live and the places where they shop.

These are solid growth numbers in areas that matter and they are important first steps to driving competitiveness in our business. Revenues and share are growing, enabling us to better scale operating expenses and deliver sustained earnings performance. A year ago we made the decision to eliminate redundancies and better align our operating expenses, and last quarter we made a commitment to reduce total costs by $3 billion. Here too we're making headway. Our operating expenses are down 7% sequentially, headcount is down 7,000 year-over-year not including acquisitions, and profitability in Global Consumer improved significantly. These are signs of tangible progress and we're confident this trend will continue.

This quarter, you will also notice we changed our reporting structure to completely break out Global Consumer from each one of the regions. We are now reporting four operating segments, Americas Commercial, EMEA Commercial, APJ Commercial, and Global Consumer and we are providing five quarters of historical data for each segment.

Finally, on the earnings call today we will be introducing our new CFO, Brian Gladden, to the broader investment community. A 20 year GE veteran and formerly CEO of SABIC Innovative Plastics, we're happy to have Brian join our team.

CES and Retail Update

Robert L Williams — Wed, 09 Jan 2008 22:45:00 GMT

Dell was at CES this week, showcasing a number of products that reflect our effort to reinvigorate our global consumer business through improved design and functionality; highlighted by our new Crystal LCD monitor, the all-in-one XPS One desktop, and redesigned Inspiron 1525 notebooks. Dell's IR team was at CES as well, meeting with investors and analysts, and answering questions on a broad range of subjects. The most common questions we received revolved around providing an update to our retail initiative, what impact retail would have on our cash conversion cycle (CCC), and what our thoughts were on the macro-economic environment? So, we thought this would be a good opportunity to address those topics in a blog post.

Since our last post on retail, Dell has forged partnerships with DSG International and Tesco to sell desktops and notebooks throughout Europe. When combined with some of the partnerships we've established in the U.S. (Best Buy, Staples, Wal-Mart), Europe (Carphone Warehouse), Asia Pacific (Gome and Bic Camera), and Latin America (Ponto Frio), we've clearly made good progress in penetrating a number of retail markets, but we still have a lot of work to do this year.

As Michael described during our November strategy call, our goal is to secure 1-2 retail partnerships in the top 20 markets by the end of the year. With each market, we will evaluate what products are appropriate and play best to our partner's audience. What you can expect is that within each region, we will partner with industry leaders that play to one of three categories: mass merchandising, consumer electronics, and home office. For example, in the U.S., we've partnered with Wal-Mart, Best Buy, and Staples respectively.

On the topics of CCC, we previously blogged that we don't expect our sales through the retail channel will have a significant impact on our negative cash conversion cycle (which remained strong in Q3 at -35 days). There is likely to be some relative impact, but CCC should remain significantly negative and advantageous for Dell. Dell's world-class manufacturing and supply chain capabilities, coupled with high-velocity partners, will help minimize the impact on DSI while the impact to DSO should be minimal as retailers' accounts receivables will be similar to our existing commercial customers.

Finally, regarding a potential macro-economic slowdown and its impact on Dell's business; as a rule, we don't comment on our performance on an intra-quarter basis. Dell remains focused on long-term growth in its key initiatives (consumer, emerging markets, mobility, SMB, and enterprise), strong cash flow generation, and sustainable value creation for our shareholders over the next 3-5 years.

Retail Initiative Update

Robert L Williams — Mon, 10 Dec 2007 18:56:00 GMT

Last Thursday, we announced that in the next several weeks, Dell XPS and Inspiron PCs would be carried in over 900 U.S. Best Buy locations and at bestbuy.com. With this agreement, Dell PCs will be available in over 10,000 locations worldwide, which in turn helps us drive towards one of our key strategic priorities: focusing on consumer. We've received several questions from the press and investors seeking additional insights into retail initiative and its impact on our business model. Since we've announced partnerships with Staples, Wal-Mart, Sam's Club, Gome, Carrefour, Bic Camera, Carphone Warehouse, and others over the past several months (with the intention of forging 1 to 2 partnerships in the top 20 countries over time), we thought this would be a good opportunity to discuss what the impact retail partnerships will have on our P&L and cash conversion cycle (CCC).

Let's tackle the impact of retail on our CCC first. To review, CCC is a metric used by investors to understand how long it takes a company to create cash flows. This metric takes into account the number of days a company keeps inventories (DSI), the amount of time it takes a company to collect money from customers (DSO), and the amount of time a company waits to pay its suppliers (DPO). In short, CCC = DSI + DSO - DPO. The shorter a company's CCC, the less time capital is tied up in the business, and hence, creates better cash flows. The beauty of the Dell model is that we typically don't take possession of parts inventory until a customer has ordered and paid for a system. Meanwhile, customers typically pay for systems immediately (with a credit card in the case of consumers), and we we'll usually ship a PC to a customer within a matter of days. Meanwhile, our suppliers don't receive payment for roughly 2 months after we take possession of parts (last quarter it was 81 days), so Dell's CCC was -35 days in Q3'08. Dell's strong cash position is then reinvested back into the business in the form of capital expenditures or acquisitions, as well as returned to shareholders in the form share repurchases.

So back to the impact of retail partnerships on our CCC. The most consistent question we've received is whether we'll see our days DSI and DSO go up when dealing with a large retailer. The best way to answer this question is to think of a retail partner similar to a commercial customer. Retail, like commercial customers, will order 100s, if not 1000s of PCs at once. And these PCs will likely consist of just several specific configurations. We'll build these PCs to the customer's specification from one of our 11 global manufacturing facilities, leverage our world-class supply chain, and ship directly to the customer much as we would a commercial customer -- so there's little impact on DSI. As for the impact on DSO, we expect retail's accounts receivables will look much the same as our commercial customers. And remember; roughly 85% of Dell's business today is driven by commercial customers, so the impact on overall DSO should be minimal.

From a P&L perspective, the retail model impacts our business differently than our direct-to-consumer model does. Though it's early in the initiative, we expect retail-driven gross margins will be lower than direct since we'll have to share part of the margin with our partners. On the other hand, the sales and marketing costs associated with the retail model should be lower since our retail partners will shoulder much of these costs. Further, another benefit of our retail model could be that these additional revenues will help offset some of the fixed costs associated with our direct business.

But it's important to remember that our US consumer business posted -1.4% operating profit in Q3'08. While the retail partnerships are a step in the right direction, there's still a lot to do to return this business to profitability. It could take time to ramp and fine tune the initiative, but eventually, we expect retail will be accretive to our bottom line.