Investor Relations attended the Credit Suisse Annual Technology Conference this week where attendees and those viewing conference events live or via webcast replay heard from Steve Felice (President, Consumer, Small and Medium Business) where he discussed Dell’s strategy, recent financial results, and industry topics. Dell executives will be speaking at additional conferences in the upcoming weeks where you can tune in and view their presentations via webcast. Brad Anderson (SVP, Enterprise Solutions Group) will be attending the Barclays Technology Conference on December 7th and Darren Thomas (General Manager, Storage) and Dario Zamarian (General Manager, Networking) will be attending the Raymond James IT Supply Chain Conference on December 13th.
In his fireside chat, Steve provided an overview of the broad strategic transformation Dell has undergone over the last several years. Dell has moved from being a hardware focused company to a solutions focused company, which is exemplified by the growth achieved in our server & networking business (+13% Y/Y), Dell-branded storage business (+23% Y/Y), and Services business (+10% Y/Y) in Q3. We’re committed to a mid-market design principle that targets the largest IT buying sector and represents where technology is headed for all users, which is to be more standards-based, adopting the cloud, and taking advantage of new emerging technologies. And, we’re doing this with a balance of organic and inorganic development focused on broadening the portfolio of Dell intellectual property. Key themes covered during Steve’s session included:
Profitable growth – Investors are supportive of Dell’s strategy to exit low-value business and believe it will make Dell healthier going forward, but they question when the pruning will be done so the company can return to a healthy top line growth rate. While there is still some work to be done in certain parts of the business, we are well past the mid-point of our pruning activities and will begin to anniversary some of these activities in the coming quarters. The company has experienced healthy and profitable growth in the high-value / high-margin parts of Dell’s business even in the current economic environment. Regarding PC growth, we fully expect the PC market to resume higher growth rates once emerging countries (i.e. China, India, Brazil, Indonesia, etc.) overtake developed countries on a PC demand basis - emerging countries are still massively underpenetrated.
Client/Mobility Strategy – Investors are focused on developments with Windows 8, Ultrabooks, and tablets and the impact they will have on PC growth. Dell’s focus is on the prosumer and commercial customer with thin and powerful devices that will satisfy currently unmet requirements, such as security, device management, and interoperability. Consistent with independent surveys which show that customers prefer a Windows-based tablet most, Dell believes Microsoft continues to be the best option in this space and will satisfy both individual and IT department needs.
Hard Disk Drive (HDD) – There remains a lot of speculation regarding who will be impacted by the HDD shortfall and by how much. Most analysts believe Dell is in as good of a position as anyone given the strategic buys we did in Q3 and the long-term strategic relationships we’ve had with HDD suppliers, which are paying dividends in this environment. The situation is still unknown and will become clearer near the end of Q4 when HDD suppliers are able to fully assess the impact and better estimate their timeline to return to full production.
Small & Medium Business (SMB) differentiation – Dell’s mid-market design focus and direct model allow Dell to be more in tune with SMB customers and better meet their needs. These factors have afforded Dell a “trusted advisor” status amongst our customers, which you see when you look at our success in ramping EqualLogic, Compellent and KACE into our SMB customer base.
We invite you to listen to a replay or read the transcript of Steve’s presentation at Credit Suisse, and hear live webcasts of Brad at Barclays on Dec 7 at 2:45pm CT, as well as Darren and Dario’s presentation at Raymond James on Dec 13 at 7:15am CT.
As always, we welcome your feedback.