Dell Spells Out Strategy for Continued Market Defiance

Commoditization model a basis for expansion plans

By Bob Brewin, Don Tennant and Maryfran Johnson

August 26, 2002 12:00 PM ET

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Computerworld - Round Rock, Texas
"We have a lot to smile about, a lot to be thankful for."
Dell Computer Corp. founder, chairman and CEO Michael Dell wasn't kidding. His company had just reported quarterly financial results that seemed to defy the reality of the IT marketplace - a profit of over half a billion dollars and 18% growth in product shipments. Last week, at his company's sprawling headquarters here, Dell spoke with Computerworld about how he plans to keep grinning in a frown-filled IT business environment.

When is IT spending going to start picking up? I had a couple TV interviews a few months ago, and somebody said, "Nobody's spending any money on IT." There were over 30 million computers sold last quarter. So that's a pretty big playground for us to play around in, and there's still a lot of money being spent on IT.


Dell Computer Corp. CEO Michael Dell

One of the things we're seeing is that the spending that is occurring is very different from the spending that was occurring two years ago, when you had this bubble and euphoria going on.
For example, a large investment bank says, "We're going to shift from proprietary Unix to Linux on Dell." So their spending for the proprietary stuff goes from tens of millions to nothing, and their spending with us goes to maybe half or 40% of what it was with the other guys, but they get more computing power. So if the industry transitions from proprietary to open, the cost comes down. It's better for customers - more efficient in all kinds of ways. It's not necessarily good for all vendors.

Is Linux going to displace higher-margin, more profitable operating-system sales? It is clearly eating into the proprietary Unix platform. Six months or a year ago, we had isolated instances. Now the whole board's lit up. It's all over many, many industries and companies, and it's getting to be a lot more of a pervasive thing. If you look at the history of this, we know what happens at the end of the movie. There aren't a lot of proprietary technologies that stay around for a long time.
You get the proprietary vendors saying, "We spend more on R&D, therefore we're better." Well, they have to spend more on R&D, because they're developing something only for themselves and they have to put all these investments in to protect the part that's proprietary.

But even these "proprietary" vendors you refer to have recognized that they have to be more standards-focused.

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