Michael Dell: "I'm not a huge fan of massive mergers..."

Michael Dell was in London this morning and gave a speech at a breakfast organised by BritishAmerican Business Inc.

Here are a few snippets of what the Dell CEO had to say...

On the economy...
"We're certainly not anticipating a massive recovery in the economy... so what we've been doing is planning to grow and expand in a market that we don't think will be necessarily growing. And that of course comes from expansion into new product lines, into new geographies, market share expansion, driving more value through to the customer. And fortunately we've been pretty successful at doing that."

On selling direct in the UK
"It was about 15 years ago that we launched here in the UK. And at the time Dell's revenues weren't' the $36bn that they'll be this year. It was $150m. It was about three years after the company had started. We were a private company, we were under-capitalised. And I was 22 years old. And we didn't know what we didn't know. There was a lot we didn't know. We had an event in the UK, we had 22 journalists show up. Twenty-one of the journalists said, 'This won't work. It's an American concept. It's going to fail, etc., etc.' And there was one journalist who said, 'Well, yeah, this might work, but I'm not really sure.'

"And of course, we had enough naivety and enough conviction to believe that it was going to work. And the other thing that we saw was that half the market was outside the United States. And even as a small under-capitalised American computer company that had everything going for it but extinction, in the late 80s nobody thought there would be American computer companies. So this was a really different way of approaching the world than was the conventional wisdom.

"But what we've essentially done is taken the business model and adapted it every time we've gone to a new country."

On new product lines...
"About every year or so we've kind of added a new product line or a new major thrust, and some are bigger and more important. For example, in the mid 90s we launched into the server business. We actually have more market share in servers now than we do in desktops and notebooks. A couple of years later the next obvious step was into storage. We're number three in storage now but we're growing about 70 per cent year over year. So we're moving up pretty fast in that field.

"Now we've launched into networking services - we've actually been in services for a long, long time in the traditional kind of box services. But we've been growing more now in the managed and professional services. So, taking over the full seat management for organisations that want us to manage the help desk, they want us to manage the assets, the software, imaging, the training. And then of course as we install more complex systems there's the deployment and consulting and design that goes along with that...

"I think, as we look across the $800bn IT market, we see a maturation of the industry which is driving standards much more rapidly into many sectors of the industry, which is putting pressure on the proprietary business model. And Dell's really the only large-scale computer systems company that completely bases its business around standards. Now, we think that provides us enormous opportunity in many fields."

On acquisitions...
"I'm not a huge fan of massive mergers and combinations. I think in our case we have a very unique business model and a unique culture, and the prospect of screwing that up by smashing our company together with another company is not my idea of a good time. And I'm in this for a good time. I'm having a lot of fun and I want to build something that we can be proud of 25 years from now and 50 years from now. And I think that's a whole lot more important than some of the books and proposals that get brought to us. I also have a fun drawer in my office where I keep some of these books. And I go back and look at them. And I'm glad I didn't gather my strategic insights from those presentations."

On innovation...
"I think we were kind of forced into innovating. Wwe were not the biggest computer company, we were not the most capitalised computer company, we were not the most famous computer company. So we had to prove that what we had was better. And so that forced us to invent a lot of new ways of doing things that delivered a lot better value. And so we looked all across the supply chain and the demand chain for innovations that would drive success for our customers.

"And if you look at a lot of our patents, the vast majority of them are product related, but there's actually quite a lot of process intellectual property there as well. And I think beyond patents and all that that there's an execution advantage that is critical for a business like ours. It's a day in day out struggle that we face and that's not something that is easily copied. A colleague of mine sent me a story from a business magazine in the United States, about ten years ago. And it basically was an article describing how one of our competitors, who was recently involved in a large merger, was going to copy the Dell business model and how it was really simple and it was a niche and... Well, at the time we had $1bn in revenue, now we have $36bn. They haven't succeeded. And I think, if they do succeed - or when they succeed, because we've always assumed that people would copy our business model innovations - I think the questions is: who's going to be better at it then?

"It's a basic struggle of business - who's got something better that's more valuable? If somebody comes up with something better than we have, then we're in serious trouble. So our job is to outthink the other guys, out innovate the other guys. And quite frankly we live in constant fear. And that's what drives us."