Dell Chairman Says PC Will Survive Technology Convergence

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Michael Dell, chairman of his self-named $40 billion company, just refused to dance with the notion that the computer will not have a future in a predicted era of technology convergence.

Humans consume information visually and will need computers even with the proliferation of smarter digital gadgets, the direct marketer told retailers Friday at the National Retail Federation's annual summit. Larger monitor screens are proof of the computer adapting to current needs.

"A lot of people talk about the death of the PC or computer in some form or another," Dell told attending senior and mid-ranking online managers at retail and supplier companies. "Last time I checked, most people used computers."

Dell Inc., the new name for Dell Computer Corp., focuses mainly on the computing and IT services market, he said. The company has a 5 percent share of the $800 billion market.

That surefootedness was visible in most answers Dell had to questions by the audience and session host Bob Tedeschi, technology columnist for The New York Times.

The PC is becoming the center of the entertainment industry, Dell said in an appearance that coincided with his company's announced foray into consumer electronics.

While markets like Japan -- with unique constraints of space -- and information-thirsty China -- whose demand for PCs surprised Dell -- quickly adapt to new digital media, the mainstream United States is a few years away. By then, Dell expects quite a few homes will have digital wiring.

Dell spelled out his thoughts about online security and privacy, two issues dogging online marketers for some time.

"I think there's certainly a risk that we're subjected to all kinds of legislation," he said. "You've got to be very clear of what you're going to do with customer information, not just in the online world but also offline. It's not just an online legislative issue, but offline as well."

Dell does not share customer data with others, he claimed.

On spam, he expects better laws and filters to address the problem. Internet users will have to sacrifice "a little bit of their privacy for a little bit of security," he said. "It's going to be a cat-and-mouse game. At some point the pain will be so great. Society will have to decide, not a company."

Dell was not concerned whether Wall Street valued e-commerce the way it should. To him, it is all about cash flow and earnings. He expects the Internet business eventually will gain acceptance as regular commerce, dropping the "e."

A major advantage Dell had over competitors, especially in the late 1990s, was its direct marketing background. The company had no stores to worry about. So there was no issue of channel conflict when e-commerce became a force with which to contend.

Not surprisingly, Dell was almost unscathed by the high-tech bust.

"We were direct," Dell said. "A lot of companies out there were not direct companies. Our Web site is just a representation of all the capabilities behind it. It's more than a channel, it's a whole business process. Because we were working directly with our customers, it was a natural for us."

The company's goal is to make it as easy as possible to shop and configure products on the site at Larger customers even get their own dedicated Dell sites. This let the company bring 85 percent of its business online.

Broadband Internet access' proliferation will only boost business, he said. It has the potential to improve the experience, though even that may slow down with an expected clutter of rich media.

"It's more an issue in the consumer segment than in the business segment," Dell said of broadband, since most offices already have fast connections.

While the company is gearing for broadband, it is working on new initiatives with its existing properties. For example, a massive relaunch of is expected soon.

Tedeschi asked whether Dell employees were under pressure. How were they motivated under tight production and performance deadlines?

"People like to be challenged, be part of a winning team," Dell said. "We tend to set challenging goals inside the company ... we did have a period where expectations got out of hand, just like investors'."

Like many marketers, Dell has shipped jobs to low-wage countries. India was mentioned. That question from the audience did not faze Dell.

"It's important to remember we're in a global economy," he said. "No economy stands on its own ... [about India] it says we've got to be more productive, more efficient."

Dell keeps a sharp eye on his Round Rock, TX, company's operating-expenses-to-sales ratio.

"Our expenses-to-sales ratio has come down, and online is a big reason for that," he said. A few years ago it was 18 percent to 19 percent. Today it is 9.6 percent.

"Most of our competitors have operating expenses of 20 percent," Dell said. "It's very difficult for a business with 17 percent gross margins and 20 percent operating expenses.

"Don't drive it too low," he cautioned, "so that you don't invest in new technology."


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