jim vanderslice vice chairman
DESCRIPTION
Jim Vanderslice Vice Chairman. Boston College. November 6, 2002. Pioneer and leader in direct business Leader in e-business Fortune 50 Company -- $32+ Billion in Global Revenue Global Company > Operating in 190 Countries World’s #2 Computer Systems Company (temporarily) - PowerPoint PPT PresentationTRANSCRIPT
November 6, 2002
Jim VandersliceVice Chairman
Boston College
www.dell.com
Dell: The Facts
• Pioneer and leader in direct business
• Leader in e-business
• Fortune 50 Company -- $32+ Billion in Global
Revenue
• Global Company > Operating in 190 Countries
• World’s #2 Computer Systems Company
(temporarily)
• #1 in Customer Satisfaction
• Approximately 38,000 Employees Worldwide
• Market Capitalization of $70 Billion
www.dell.com
Foundation in Direct Model:Fundamentally Advantaged
Ownership of value chain/informationStructural costs•OPEX•Manufacturing•Warranty
CustomerExperience
Model advantages unique to Dell & take significant time/cost to replicate
Suppliers DELL Customers
Direct Model
Competitor Model
Suppliers OEM Customers
Outsourcing Channel
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LIQUIDITY$869 million in cash flow from operations4 days of inventory*$8.6 billion in cash & investments*CCC -37 days*
PROFITABILITY Gross margins = 17.9%
Operating Margin = 8.0% OPEX percent of revenue = 9.9%*
GROWTHDell units +18%, market down -5%Units #2 WW, #1 USFavorable mix shift to enterprise
• Delivered $0.19 EPS and $8.5 billion in revenues
• Repurchased 14 million shares of stock• Shipped record number of units during
quarter
* Value ties or sets company record
Executing the Direct Model:Q2FY03 Performance
www.dell.com
Fundamental #1
Take RisksTake Risks
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Dell’s Enterprise Success
#1 in Servers (U.S.)
#2 in Servers (Worldwide)
#1 in Workstations (Worldwide)
Storage revenues grew 72 percent year-over-year in Q2
Dell EMC and PowerConnect Ahead of Expectations
www.dell.com
Leveraging our Core Business
0%
4%
8%
12%
16%
20%
1995 1997 1999 2001
Source: IDC
Market Share -- WW Corporate
Continue to gain share in all products & segments:
• #1 in WW Corporate• #1 in WW SMB• #1 in WW Public• #3 in WW Consumer• #1 in WW Desktops• #1 in WW Notebooks• #2 in WW Servers
Continue to grow profitable $3.5 billion software & peripherals business
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Fundamental #2
Efficiency WinsEfficiency Wins
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Executing the Direct Model:Significant Cost Advantage
Competitor OPEX greater than 2x Dell
Dell focused on maintaining advantage
Translated cost adv. into profitable share gains• WW share incr. from
9.7% in Q1’00 to 15% in Q2’02
• 55% increase in 10 quarters
0%
5%
10%
15%
20%
25%
30%
35%
Q3'0
0
Q4'0
0
Q1'0
1
Q2'0
1
Q3'0
1
Q4'0
1
Q1'0
2
Q2'0
2
Operating Expense Over Time (% sales)
HPQ
Source: Company Financial Statements
www.dell.com
U.S.Install Base
Benefit
U.S. Current Year
Warranty Cost Reduction
ROW Current Year
Warranty CostReduction
$430M
Total COGSBenefit
$105M
$150M
$175M
$255MCurrent Year
Shipments
Dell Confiden tial 8/19/2002 , 1
FY’03 Cost Governance ChallengeOn Target to Exceed Challenge!On Target to Exceed Challenge!
Adv
anta
ged
Com
mod
itie
s
Str
uctu
ral
Mate
rial
Tra
nsfo
rmat
ion
War
rant
y CO
GS
Adv
anta
ged
Com
mod
itie
s
Str
uctu
ral
Mate
rial
Tra
nsfo
rmat
ion
War
rant
y CO
GS
Committed
FY03 YTD TargetFY03 YTD Target
Adv
anta
ged
Com
mod
itie
s
Str
uctu
ral
Mate
rial
Tra
nsfo
rmat
ion
War
rant
y CO
GS
Challenge
Alli
ance
dS
avin
gs
Str
uct
ura
l Mat
eri
al
Tra
nsf
orm
atio
n
War
ran
ty C
OG
S
$916M FY03
$290M $27MTarget $364M$236M $916M
$1,046M
$292M$292M
Levers
$376M
$72M$72M
$255M $51M $364M
$128M$128M $83M$83M $9M$9M
FY03 YTD ActualFY03 YTD Actual $148M$148M $89M$89M $18M$18M $97M$97M $352M$352M
•Service Labor rates
•Product Quality Improvements
•Global Site Optimization
•Inventory management
A key focus area for the company is to reduce cost by $1B in FY03. Warranty cost reduction is a major component of this initiative. At the end of Q2 FY03, Dell’s warranty cost reduction projection for FY03 consisted of the following:
FY03 Initiatives – Warranty Cost Reduction
www.dell.com
Fundamental #3
Speed is LifeSpeed is Life
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Historical Cash Conversion Cycle (Q1 FY99 – Q4 FY02)
Dell
Compaq
Hewlett Packard
IBM
Sun
Q1FY99
Q2 Q3 Q4 Q1FY00
Q2 Q3 Q4 Q1FY01
Q2 Q3 Q4 Q1FY02
Q2 Q3 Q4(50)
0
50
100
Cas
h C
on
ver
sio
n C
ycle
(D
ays)
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Fundamental #4
Grow or DieGrow or Die
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4.3%
12.7%
5.7%
9.7%
22.8%
15.0%
7.1%
4.7%
10.5%
27.2%
0%
10%
20%
30%
US EMEA APAC Japan Worldwide
Mkt. Position 1 2 4 4 2
Dell Y/YGrowth 23% 5% 13% 10% 18%
Dell Premium 25% 9% 11% 23% 20%
Dell CY ‘02 Q2 ShareDell CY ‘01 Q2 Share
Dell Gaining Share in All Regions
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Selectively identify markets
Extending the Direct Model:
Method for Extension
Fit our economics – large, profitable, standardizingLeverage our capabilities
Enter with low investmentPartnership with existing playerBrand 3rd party products
Layer in new capabilities/offerings over time Take ownership of the value
chainImprove margins
Direct Model extends into new markets, we:
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Standardizing, adjacent to core, leverage existing channelAddressable market now ~$30 billionEMC Partnership• Continues to progress; revenues up 65% Q/Q
• Introduction of the co-branded CX600
Opportunities for Growth:External Storage
$0 B
$5 B
$10 B
$15 B
$20 B
$25 B
$30 B
$35 B
DELL PowerVaultDELL EMC
2
DELL PowerVaultand
DAS
NASSAN
Storage HW Addressable Market
Addressable market
doubles with EMC Alliance
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Fundamental #5
Exceed ExpectationsExceed Expectations
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On-Time, Reliable DeliveryProduct AvailabilityTime to RepairPrice/PerformanceTotal Cost of OwnershipVolume Discounts
Significant Lead In: On-Time, Reliable DeliveryOverall HW PerformancePrice/PerformanceTotal Cost of OwnershipVolume DiscountsOverall Satisfaction
Out-of-Box QualityReplacement Parts AvailabilityPrice/PerformanceTotal Cost of OwnershipVolume DiscountsOverall Satisfaction
DellCompaqHewlett PackardIBMGatewayToshiba
Category Leader In:
Desktops Notebooks Servers
80 8279
83
86
7881
81
8482
84
86
70
75
80
85
90
TBR
Cat
egor
y R
anki
ng
10 of 13 Categories 10 of 15 Categories 12 of 16 Categories
Source: TBR Customer Satisfaction Study, Q4 01
79
The Customer Experience
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Fundamental #6
Be Relevant to CustomersBe Relevant to Customers
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1994$4B
1996 $8B
Large Customers Small Customers (Business and Consumer)
LargeCompanies
MidsizeCompanies Government Small
Customers
GlobalEnterpriseAccounts
LargeCompanies
MidsizeCompanies
CivilianDept. of Defense
& Intelligence
State & Local
SmallCompanies Consumers
Education & Healthcare
Higher Ed. K-12 Healthcare
2001$32B
1998 $18B
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Companies that Work in Isolation Continue to
Overspend
Source: Dell, Company Financials
0%
5%
10%
15%
20%
SUNW DELL
Sun R&DInefficiency:
8%
19%
11%
3rd Party R&D
In-house R&D3rd Party R&D
In-house R&D
Server R&D as Percent of Revenues
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Fundamental #7
ListenListen
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Customers Told Us …
Linux
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Differentiated PerformanceO
pera
tin
g I
ncom
e
%
Revenue Growth Y/Y - Q2'02
-10
0
10
20
30%
-40 -30 -20 -10 0 10 20%
$5BRev
• Dell performance among upper echelon of enterprise companies
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Fundamental #8
Build Strong RelationshipsBuild Strong Relationships
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Fundamental #9
Believe in YourselfBelieve in Yourself
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Performing in a Weak Market
-25%
0%
25%
Q4 FY00 Q4 FY01 Q4 FY02
Un
it G
row
th
9%
12%
15%
Mar
ket
Sh
are
WW Market Unit Growth
Dell Market Share
Dell GrowthPremium
16% 11% 7% 2% 35% 23% 23% 21% 18%
www.dell.com
5%
10%
15%
20%
25%
Q3 97 Q1 98 Q3 98 Q1 99 Q3 99 Q1 00 Q3 00 Q1 01 Q3 01 Q1 02
Customers Prefer Dell:Market Share Up +158%
HPQ down -23%
DELL up +158%
IBM down -19%
Source: IDC
WW
Mark
et
Sh
are
Worldwide Unit Market ShareAll Products – Last 5 Years
Questions& Answers