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After the Buyout, Michael Dell Is Doubling Down on the Enterprise (Q&A)

Dell's new ad campaign says it's "future ready." What does that mean, exactly?

Justin Sullivan / Getty via Thinkstock

In 2013, Michael Dell and the private equity firm Silver Lake laid out a strategy to take the computing and IT company Dell private in a buyout that valued the company at $25 billion.

At the time, the plan was to cut back the company’s reliance on sales of personal computers for the majority of its revenue and to go strong on enterprise technology, selling more servers, storage, networking and security products. But now that Dell is privately held, it’s hard to evaluate exactly how well the strategy has worked out.

Analyst firms show its presence growing in areas like server sales and leading in certain metrics in data storage. And one visible indicator of its new emphasis has been a marketing campaign launched recently that aims to portray Dell as “future ready,” including a TV spot that has been seeing heavy rotation during the last two weeks. (You can see the video below.)

Re/code recently caught up with CEO and founder Dell to talk about the state of the company’s business and where it’s going from here.

Re/code: When you took the company private, the strategic plan you outlined at the time was to double down on the enterprise. How is it going?

Dell: We’ve been investing heavily in research and development around converged infrastructure and software-defined technology — both storage and networking. There’s been a big move in our direction toward using X86 chips for all kinds of new workloads in the data center. There’s been an explosion in the amount of data that’s being created, and that’s fueled an explosion in the demand for infrastructure … and it’s not just computers and servers.

When you say software-defined, what do you mean, for those who don’t know?

The switch, the storage, the firewall, all run as applications within a computing engine. … If you look at the whole trend toward software-defined technology, it’s basically virtualization going from the compute layer all the way through storage and networking. The other interesting thing about this: When you move toward networking and storage that are software-defined, the anchor tenant in the data center becomes the server.

Generally speaking, how is the business going?

We’ve been consistently growing our revenue at a double-digit rate. The other interesting thing is with storage capacity. When you combine internal and external storage, we’re number one in the world on a capacity-shipped basis.

So how is the demand picture shifting with your customers? What new things are they asking for?

We’re seeing new connections from the data center to the client device, which used to mean just a PC, but now it could be an embedded node inside an industrial machine. I just visited a big customer yesterday. It’s an industrial client who makes a lot of heavy equipment. Think of the big companies like GE, Honeywell, Siemens, Tyco, ABB. They are making all of the equipment build smart, putting intelligence, sensors and small computers inside those machines.

And sometimes we’re building those sensors. We’re building gateways on the network to collect all the data, and then bringing it up to the data center to turn the information into better results in terms of maintenance, performance, capacity and all those kinds of things. The appetite for this is extremely high among the customers.

You’re launching this campaign at a moment when your primary rival, Hewlett-Packard, is getting ready to split into two companies. But it’s also coming at a moment when I could argue that Dell is a smaller part of the overall tech discussion than it used to be. Why this campaign right now?

I wouldn’t agree with the second part. There’s data from Gartner saying that we’ve had a big increase in the positives and strong positive reactions from our customers, and if you look at the distribution of Dell’s rankings among the Garnter magic quadrants, we’re quite a bit more positive than HP. Their position is middling and ours is much more positive. Certainly being in security services with SecureWorks is a standout versus HP. And if you look at what we’ve done with Boomi, all these cloud applications that companies are deploying have to be made to work with each other and with older legacy applications. We’re doing 32 times more integrations than our nearest competitor. We made this investment way ahead of others as a sort of “where the puck is going” kind of move.

You keep talking about how healthy the business is, and yet I can’t pull an earnings report and check your numbers. What else indicates how things are going?

If you look at the value of our debt — which is publicly traded — and how it trades, it pretty much moves like it did when we were public. We said we were going private, the debt went down, we went private and paid a bunch of the debt off. And now the debt is trading right back at the same levels it was when we were public … What that tells you is that the market says that Dell is a company you shouldn’t worry about.

We’ve had upgrades on our debt from the rating agencies. And we’re investing in our business and we treat it like we own the whole thing. If there were something good or bad going on with the debt, you’d see it going on in how the debt is traded.

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