Last week, at the Fortune Brainstorm: Tech Conference in Half Moon Bay, Calif., I caught up with Michael Dell, founder and CEO of Dell (DELL), the Round Rock (Tex.) computer hardware maker. He's been trying to get Dell's mojo back for over a year now, and in the past three months, things have started to come together, with sales, profits, and stock price beginning to move in the right direction.
We had a wide-ranging conversation, one that covered everything from cloud computing and the likelihood of Dell entering the smartphone business to the advantages of being a founder. Below are edited excerpts from my chat with the eighth-richest man in the U.S., who is as humble today as the day he started selling computers from his college dorm room.
On Cloud Computing
Will Dell ever start offering its own cloud services?
Today, we sell to the guys who make clouds. We actually already have some services that we provide; you can think of them as software-as-a-service. For example, for managing your infrastructure, we purchased a number of companies recently like Everdream that are all services provided online. We've got a huge business in managing the computing infrastructure for large companies.
What do you do as a company to become a leader in cloud client computers?
For the last eight years, here in the U.S., we've sold more computers than any company in the world. In fact, last quarter our lead widened relative to the No. 2 company. Mobile Internet devices and smartphones are all part of our mobile computer business. Our focus is on the bull's-eye of the volume, which today is notebooks, computers, and laptops.
The interesting question is these "Internet-in-the-pocket" kind of things. Do those replace the notebook, or are they a complement to the notebook? That is the kind of threshold question one would think about as you explore this.
It is actually a complementary device. But I think the bigger opportunity is in buying those devices because they can be replaced every six months.
No question, this is a large and significant opportunity and…I think you will see Dell move in that direction. But I think it will be sequenced in the right order relative to all the opportunities we have.
What do you think is the biggest opportunity for Dell?
We have identified five big opportunities. When I say big, I'm talking about $5 billion to $10 billion each in terms of scale opportunities. They are the consumer business, mobile computers, emerging countries, enterprise, and small/medium business. We have reorganized the company around these key priorities.
Any plans for mobile phones or smartphones?
We are certainly looking at the whole smartphone category, but I wouldn't expect anything anytime soon.
With the emergence of Google's (GOOG) Android, and with Symbian OS and Microsoft Mobile already on the market, do you think that makes it easier for Dell to get into the phone business?
What you've got are industry-standard platforms upon which applications are being built and ecosystems are being created, and that kind of building-block architecture gives us all sorts of opportunities.
You can be a big game-changer in this market, right? You can decide to work with Android or Symbian. Is there a desire on your part to work with one over the other?
We're not ready to publicly disclose our plans there…we're working on that.
On Being a Founder
From your perspective, what makes a founder/CEO different from a professional CEO?
The founder has special permission to make changes at a company. There have been two or three times within the history of the company where we've made some dramatic changes; the last year and a half has been a good example of that. When I told our company that the direct model has been a great revolution for the industry but it's not a religion, that was actually a big shock to a lot of our people. Some of them thought it was a religion.
I think as a founder you get special permission to call into question things from the past, and it is up to you to figure out how to do that.
So it's almost like a political job in that sense.
I think there's a lot of equity and trust that gets built up in the company over time. And when we've laid out the priorities in the organization—if we've done a good job and people see the results and they can see how their efforts apply to their success, and how they can realize their own dreams at the company—then they say: "These guys know what they're doing."
On the Future
My impression has always been that your biggest competitive advantage was your supply chain; you fine-tuned it to such a level that others couldn't compete. That has evolved over a period of time because others have started to think like the "Dell" way. What is the next competitive advantage going forward?
I think it's true that we have had and have a supply-chain advantage. If you look at, for example, return on equity, you'll see that our return on equity or vested capital has been massively higher than our competitors and still is today.
That advantage is very much intact in terms of the capital efficiency of the business. But I think that is really only part of the story. What informs that advantage is the connection we have with customers and the information that customers convey to us in the process. By knowing exactly what customers want and being able to build that and provide products and services tailored to customers' needs and being able to personalize products—that creates significant advantage and significant growth possibilities for us.