CRN Exclusive: Dell Top PC Exec Clarke Talks 2016's PC Outlook, Microsoft Surface Book And EMC

Dell Exec Optimistic About PC Market

Amid a treacherous PC market and on the eve of buying EMC, does Dell still care about the PC? In two words -- and with a hint of a Texas twang -- "Hell, yeah!"

Jeffrey Clarke, vice chairman, operations, and president of Dell's client solutions, said the PC is central to the Round Rock, Texas-based company's end-to-end enterprise strategy.

CRN recently caught up with Clarke -- who leads Dell's PC business from manufacturing to the supply chain, engineering and design of desktops, notebooks and workstations -- in Las Vegas at the Consumer Electronics Show.

The Dell veteran, who joined the company in 1987 -- one year before CEO Michael Dell took his company public -- discussed everything from Microsoft's release of the Surface Book to Apple's success in the PC market and why Dell's pending EMC acquisition will be good for PC sales.

As Dell continues to evolve from a PC maker into an enterprise powerhouse, how important are PCs to Dell’s mission?

Dell is becoming an end-to-end service provider. The client [PC] is an essential part of Dell's larger ecosystem. We believe the edge of the network is just as important as the network and the data center. Devices -- from desktop [to] tablet, notebook, workstation, thin client and soon Internet of Things -- are all glued to server, storage and the data center. These are all things we do.

As Michael [Dell] often reminds [us], you can't be an end-to-end enterprise company without both ends.

How does your client strategy evolve after the EMC acquisition?

We will continue to innovate. Pending regulatory approval of the transaction, we are already doubled down and well-positioned for growing our business and building on the success of our channel partners. Our client business gives partners a great presence in the largest companies in the world all the way down to midmarket to small business. I like our position today and even more tomorrow.

If you take EMC's presence in virtualization and storage and Dell's presence in servers and the lower end of the storage market and our presence in the commercial PC, wow, that's my kind of colorful of a way of describing a technology powerhouse.

How does EMC make your PC business stronger?

Remember, the PC business is all about scale. The more stuff you buy, the better the cost. The less stuff you build, the worse the cost. EMC will help us with scale across our PC business as well as our entire portfolio.

Do you get better pricing when you only buy enterprise drives? Or do you get a better price when you buy C drives, desktop drives, SSD, server drives and high-end storage drives? It's the latter.

What percentage of PC sales goes through the channel?

As a private company, we don't give those numbers out. I will say that overall PC sales closely aligns with Dell's overall channel sales of 40 percent.

At the end to the day, we want our solutions to be bought by any mechanism our customers want to buy them. We want the broadest market we can. Clearly our heritage is as a direct sales company. But the transformation of the company today is embracing a blended go-to-market model.

In a down PC market, how does Dell’s PC business survive or thrive?

Michael [Dell] (pictured) says in the next five to seven years, 80 percent of global PC sales will be driven by three PC makers. Dell will be one of them.

Right now, the top three PC makers make up about 54 percent of the market. Sony quit. Toshiba's PC business is on the ropes. Acer is down 25 percent last quarter. Samsung is getting out of the PC market. Who is left? Dell sees a lot of margin up for grabs as other companies bow out.

Under these market conditions, it's not unreasonable to see Dell double its market share.

Assume the other two PC makers you'll be battling for market share are HP Inc. and Lenovo. What’s your advantage?

This is a scale business. If you're not committed to participating in the consumer and commercial space -- from the low end to the premium space -- with a broad portfolio of PCs, you're just not going to be able to compete. At the end of the day, it's a cost business. You need scale to bring down cost. And if your market share is shrinking, instead of growing, you are increasing cost.

What about innovation? Where does Dell take the PC from here?

If you look at the areas Dell is making investments, it's display technology that makes using a PC even more immersive. Whether it's 4-K or 8-K display, OLED or infinity-edge bezels, we are committed to continue to bring the very best technology to the marketplace. Take a look at our 13-inch XPS -- the smallest 13-inch laptop on the market. Nobody has anything like it on the market.

You are going to see narrower screen bezels and thinner display that allow us to challenge what a laptop is, or a 2-in-1. The notebook is already evolving. We are now delivering the utility of the laptop to 2-in-1s and tablets already.

But don't those innovative form factors bite into your PC sales?

This point of view that the PC is dead and that tablets will replace the notebook is insane. Think about it. If people have a tablet and they want to make the tablet useful, what do they have? They add a keyboard. We believe if it's beyond just sitting on the couch, people are going to add or want a keyboard. What's a tablet with a keyboard? What's a convertible, a 2-in-1, a hybrid? These devices have a display, a microprocessor and a keyboard. These are PCs. These are notebooks. Call them what you want. They are sales for Dell.

Last I checked, some of the form factors you are talking about, such as 2-in-1, are still lagging behind traditional laptop sales.

I disagree. The 2-in-1 is the fastest-growing subcategory in the marketplace, no question. I can't tell you what the mix is versus PC. But I can tell you our mix of 2-in-1 PC is up from last year and will be up next year.

Are customers distinguishing between laptop, 2-in-1 and convertible?

I think that the utility of the 2-in-1, convertible, hybrid or whatever your favorite word is to describe these PCs appeals to a customer segment that continues to grow. What's happening is, the growth in the 2-in-1 category is being masked in the news by headlines that the PC industry is down 10 percent.

So where do you see tablets fitting into the PC food chain?

Tablets are going to be pushed down into a single-use scenario of content and consumption category. Few are going to want to put a keyboard on a tablet [that is] 10 inches or smaller. Anything bigger than 10 inches is something more akin to a hybrid and more 2-in-1.

Where do you come down on Microsoft entering the laptop space with its Surface Book? Aren't you miffed?

Look, in my mind anything that helps establish the Windows ecosystem and build the Windows ecosystems is OK by me. I like my chances in competing against Microsoft in a pure hardware business.

I've been doing this for three decades. Do I like that they can show off the technology and what it's capable of doing? Do I like it that Microsoft is showing there are alternatives in the marketplace and that PCs above $1,000 can run Windows? I love it.

So you don't see Microsoft as a threat in the laptop and tablet space?

I probably have a different view of many in our industry. I don't view Microsoft as a threat at all. I view it as someone helping to build out a more robust ecosystem and expand the category. And if they are successful expanding the category, that's good for all of us.

The technology that Microsoft is putting in its products isn't anything different than what Dell has thought of or not capable of putting in our own products.

We are reselling Microsoft's Surface tablet. Why? Because Microsoft likes our service model. They like our relationship with customers and our ability to take Dell ProSupport and apply it to a tablet. … [Microsoft] doesn't have 30 years of service backbone for the commercial segment.

With the success you're seeing with your premium brand, XPS, can you say that Dell customers are willing to pay more to get more?

That's too broad of a statement. We have a lot of attractive price points for XPS, from $799 and $899. I also sell a lot of $200, $300 and $400 notebooks. A lot of people are just never going to buy any laptop for over $500.

I don't waste any marketing dollars trying to convince someone with a $500 budget to buy a $1,000 notebook. Can we get someone with a $450 budget to spend an extra $50 on a laptop, maybe. These are two different customers. Dell makes great $350 laptops, just like it makes great $1,000 laptops.

That said, we have seen a 250 percent growth in XPS business year over year.

Apple seems to be the only computer maker gaining market share. Like Microsoft, Apple is promoting the PC as more than just commodity hardware. What is it that Dell and other PC makers can learn from Apple's success?

I think our industry got a little complacent for a couple of generations. What you are seeing is a resurgence of innovation and a commitment to build great products. If you go around and look at what Dell has today, you'll notice the products are a lot better now than they were a year ago. They are better than they were two years ago. And they are going to be better two years from now.

If anything, Apple has shown, great products matter. Dell makes great products and we continue to build more great products and broaden that portfolio. Dell makes great products at $300 or $3,000.