Michael Dell To HP: Dell Is On The Attack, Playing Offense In Midst Of HP 'Chaos'--

Dell founder and CEO Michael Dell has a message for Hewlett Packard as the company splits apart into two separate companies: Dell is going on the attack, playing offensive as HP grapples with the chaos of breaking apart.

"I don't know why they did it, you'll have to ask them that, I know that you don't score points when you are on defense and we are on offense," said Dell responding to a question on the HP split as part of a 45 minute no holds barred interview with Channel Company CEO Robert Faletra at the BoB Conference Monday at the Hyatt Regency Grand Cypress in Orlando, Fla.

"They are going to go through a period of being distracted. There is chaos in trying to separate two large companies like that."

Dell's appearance at the BoB conference came one week to the day after Hewlett Packard confirmed its split into what would become two publically traded Fortune 50 companies: a $57 billion PC and Printing business and a $7billion enterprise computing with Dell now becoming the largest end to end integrated technology provider at $60 billion.

The HP break up is going to have ripple effects on HP customers and partners, said Dell. He pointed to the difficulty of breaking apart a single building of HP employees in a major country.

"Think of all the (HP) people in a (single) building, then you have to sort of separate them out, now you need two buildings, now the first building is too big, so now you need three buildings, get rid of the first one, move these people over here to over there, establish new legal entities, multiply that by 180 countries, all the partners, all the customers, it is a level of chaos that one really has to question," said Dell.

At the same time, HP is going through the split up, Dell said his company will be leveraging what he called the broadest and deepest end-to-end IT solutions portfolio to win business. "We are very well positioned, we are growing rapidly," he said, speaking to several hundred of the top solution providers at the invite-only event. "I think we are the best positioned company for partners with the broadest range of solutions. I think we can legitimately say today we are the most stable in terms of leadership and product."

Dell insisted the "leverage and connection" between the client business, particularly the commercial client systems, and the data center is a strategic advantage for Dell.

"We see that as quite strong and always have," said Dell, "We are absolutely going in a different direction (than HP) in solutions. We are on the attack. We are on the offensive and we are going to be scoring points."

In the wide ranging interview, Dell confirmed that the $24.9 billion leveraged buyout of his company, which took place a year ago, one of the largest buyouts in history, has made Dell more profitable, making deeper investments in research and development and growing faster with channel partners. "We are growing at double digits," he said. "I don't have a lot of complaints."

Dell, who owns 75 percent of the privately held company, left little doubt that he is enjoying running Dell as a private entity. "It certainly makes decision making faster," he said. "It's a lot of fun."

The three tenets for the company as it enters its second year as a private company are: stability, comprehensive end-to-end solutions and partner profitability, said Dell.

Dell hinted that there will be even greater channel profitability incentives aimed at accelerating channel growth announced when Dell hosts its second annual Dell World conference Nov. 4-6 in Austin, Texas.

"A number of you are going to be at Dell World in a few weeks and we will have a whole series of announcements centered around those three themes (stability, end to end solutions, partner profitability)," he said.

Dell channel sales now account for one third of Dell's commercial sales, about $20 billion, including 60 percent of the company's software business and two thirds of the company's federal government business. "It is only going up," Dell promised. "And there is no upper limit."

Dell, in fact, said it could be "relatively soon" when the company is deriving the majority of its sales from channel partners. "It wouldn't surprise me if we reach the halfway point relatively soon," he said. "We are embracing the channel in even more significant ways. Distribution is another example. We didn't initially embrace distribution. We now have Ingram, Tech Data, Synnex. The whole channel program is growing."

Among the channel gains Dell has made are a doubling of the number of IBM partners that have signed up with Dell as IBM completed the sale of its low-end x86 server business to Chinese computer giant Lenovo for $2.3 billion.

Dell said the problem with that deal is that Lenovo is sitting on the sidelines in the fastest growth part of the server market: the converged and hyper converged infrastructure market.

"The game has changed," he said, pointing to Dell's fully converged infrastructure offering including an OEM deal with hyper converged high flyer Nutanix.

Lenovo is also attempting to complete and integrate the $2.91 billion acquisition of smartphone maker Motorola mobility from Google. That deal faces almost insurmountable odds in the intensely competitive smartphone market where companies have lost billions of dollars, said Dell.

"There are some really nice products there that are losing enormous sums of money," he said. "That is the game they have entered. We'll see how it goes."

Dell said his company has no interest in playing in the smartphone market. "We are not going there," he said. "That is an extremely tough business."

Dell said he views the channel as much a part of its DNA as Dell direct. "When we started (in 2007) it was a program, now as a $20 billion plus business, a substantial part of our revenue and even more substantial part of our absolute growth we are integrating channel in everything we do," he said.

Solution providers attending the BoB conference agreed. They said they see Dell as a channel power that has become a trusted partner.

Rory Sanchez, CEO of SLPowers, a Dell solution provider based in West Palm Beach, Florida, said Dell has achieved a level of trust as a partner that is unmatched by other long time channel companies.

One sign of that commitment is SLPowers' status as a Dell GEO services partner providing services on behalf of Dell. "Four years ago if someone said Dell is going to be your number one vendor, I would have said you are smoking something," he said. "The Dell direct team is being incented with a 1.2 times sales quota lift to put things through partners and work with us. We are leading with Dell."

Sanchez said his team meets regularly with Dell direct sales reps to grow the business. "From our perspective, Dell has nailed it, they have created an excellent partner program. The number one thing we have got going for us is we trust Dell, a company that not too long ago we did not trust. We trust Dell not to go around us, but to make us part of the transaction. We feel very comfortable bringing Dell in, way more comfortable than other vendors, and our Dell business is up double digits."

Michael Goldstein, president and CEO of LAN Infotech, a Fort Lauderdale, Fla.-based Dell partner, said he also has a level of trust with his Dell reps that is driving a 25 percent increase in his Dell business this year. "The trust is there," he said. "We have become the trusted advisor for customers working with Dell reps. We don't have to worry the client is going to go direct to Dell and get a better price. They are getting the best price by working with us as a Dell partner."
Goldstein said he sees Dell winning more business in the future as a broad end to end supplier of IT solutions. "Dell is a one stop shop for everything from client devices to end point security to data center," he said. "There is trust in knowing you have one company behind an end to end IT solution."

Goldstein said he sees the Dell channel partner value proposition getting stronger every year. "It sounds like the Dell channel program is going to get even better with even more incentives for the Dell direct team to work more closely with partners," he said. "That shows Dell's commitment."

Ron Dupler, CEO of Greenpages Technology Solutions, the well-respected national cloud provider, No. 151 on the CRN SP500, which also does services subcontracting work for Dell, said he sees Dell as a "good partner" and one of the company's core technology vendor partners.

"They have made exponential progress in terms of their channel program," he said.

Dupler said Dell was prescient taking his company private last year to gain an advantage over competitors like HP. "Michael was able to take his company private to drive through a transformation," he said. "That was a bold move on his part and it paid off. (HP CEO) Meg (Whitman) doesn't have the luxury of taking HP private. So she is trying to do it by breaking the company apart and bringing focus to each business segment. It is all about transformation."

Bob Venero, the CEO of Future Tech Inc., a Holbrook, New York solution provider, No. 234 on the CRN SP500, said he sees Dell becoming even more "tenacious" in its second year as a public company.

"Dell sees an opportunity to take a very offensive position to win where there is fear, uncertainty and doubt in the market," Venero said. "Dell is growing fast because it is one of the last standing full service OEMs out there from the client to the data center to software and services and networking. Customers can leverage their IT spend across all Dell lines for better discount, better interoperability and a stronger relationship."

Venero credited Dell with driving enormous profitability into the channel. He said Dell's channel progress has been staggering. "This is a company whose entire DNA was direct and now has a $20 billion channel business," he said "That is astounding."