Michael Dell On HP PC Predicament: Sometimes The Ball Bounces In Your Direction

HP's possible plan to spinoff its PC business

Benioff broke the tension from the start of the 45-minute keynote by telling Dell that "HP is leaving the PC industry and leaving it all to you."

"Sometimes the ball just bounces in your direction," Dell said. "As I was thinking about this, I sort of reflected on what are the really great things that ever happened to us that we had no control over, and certainly this would have to be one of the very best ones."

HP's board of directors announced on Aug. 18 that HP was evaluating strategic alternatives for its Personal Systems Group (PSG), including the "separation of the PC business into a separate company through a spin-off or other transaction."

Dell has been vocal about HP's potential PC spinoff, taking to Twitter to inform the world that Dell plans to stick by customers and partners through HP's transition. And in an exclusive interview with CRN, Dell said his company has seen high interest from solution providers since HP's PC disclosure and that Dell will continue to work with partners to take on the PC industry.

In turn, HP's Todd Bradley, executive vice president of the company's Personal Systems Group, recently told partners they have "unwavering" support in terms of ongoing marketing and channel initiatives and urged them not to give in to challengers trying to weaken HP's partner relationships.

"I’m sure that our friends at not only Dell but people like EMC and Cisco and probably Lexmark are using this opportunity to try to crack the strength of our ecosystem, the strength of our partner relationships," Bradley said in a conference call with partners last month.

If HP does spinoff or sell its $40 billion PC unit, it could have a deeper impact on HP's overall business than dismantling the No. 1 global PC company, Dell said, noting that HP server sales could also suffer if HP makes the decision to stop selling PCs.

"We also know, in terms of the supply chain, that there are very tight integrations," Dell said, later adding: "A lot customers like to buy their servers and clients from the same company, so that itself is an opportunity."

Meanwhile, HP could face rising component, chip and processor costs for its other product lines if its PC unit is dissolved. According to Dell, 5 percent of disk drives sit inside data centers, while 95 percent are in PCs, set top boxes and other end devices. Microprocessors, chips and components are split by roughly the same percentages.

"If you were a big provider of PCs and you kind of sold that off you would go from one of the largest buyers in the world of these components to not being in the top five, or perhaps even lower. That effectively raises the cost of all of those products to customers. And that's generally not a good thing," Dell said.

By covering a host of different technology areas, Dell has evolved to meet continuing customer needs, Dell said. And while Dell has branched into software, storage, networks, data centers and other areas, hardware remains at the heart of it all.

"Software is great, but you have to run it one something. That's called hardware," Dell said. "We absolutely believe that value continues to shift in the industry to software and to services and solutions, that's why we've been making all the changes and evolution we have been. But we don't think the hardware goes away."

The ongoing tablet revolution is also highlighting the importance of hardware. And while Apple is clearly in the lead with the iPad and Google Android making strides, Dell said the tablet market is "dynamically evolving" and so far "nobody else has really done all that well, yet" against Apple.

"We believe there's still a big role for the device," he said, pointing to the growing use of tablets and smartphones and the roughly 1.5 billion PCs in the market, which Gartner expects to hit 2 billion by 2014. Dell continued, "At the front end of any productivity-driven environment you see a lot of these PCs and client devices … We think the role of the device absolutely continues."