When: Today, Friday, September 13th
Where: CNBC's "Closing Bell"
Following is the unofficial transcript of a CNBC EXCLUSIVE interview with Dell Inc. Chairman & CEO Michael Dell on CNBC's "Closing Bell" today, Friday, September 13th. Please note: Part 1 of this interview aired this morning on CNBC's "Squawk on the Street."
All references must be sourced to CNBC.
MARIA BARTIROMO: Michael, that was great on the live. Thanks so much. We're going to continue right now on tape. And really what I want to get to is some of the big opportunities you have in small and mid-cap-- business. A lot of people feel that that's really your leadership and your sweet spot. So I'm going to get right into that right now.
MICHAEL DELL: Great, okay. Great.
MARIA BARTIROMO: Michael, one opportunity-- that seems to be really a big one for Dell is this small and mid-cap category. I want to ask you about that, but as you thrive in mid cap-- do you leave the larger companies on the sideline? Tell me the opportunity for the smaller and mid cap-- part of business.
MICHAEL DELL: We serve customers of all sizes. But what is often misunderstood about a $3 trillion plus IT industry is that the largest part of it are actually small midsize customers. It's also the fastest growing part. Now, they're the hardest to get to as well. And Dell has-- always had an enormous advantage in our channel and our direct relationship with these customers and our channel partners-- you know, more recently in the last half a decade or so.
And building products that those customers-- and solutions that those customers can rapidly adopt and capture value from is a winning formula. And so, we got a great business serving those customers. This is where all the growth in the economy is. And we're actually focused there. But what I'll tell you is that those very same solutions scale up to the very largest companies in the world. What happens in technology when something new comes along, the large companies, it's hard for them to adopt it.
They have to connect with all their-- you know, other systems and they-- you know, it's a little slower and more complicated. Smaller companies, they just take it right away, right? Nobody running an internet business has a mainframe, right? They're all on x86 servers and Dell has leading share with those companies.
Now you see x86 is-- are the overwhelming majority of all processing and data centers. We're now doing an enormous number of lean frame migrations, using large customers, you know, the largest companies in the world, moving them off of their old legacy platforms. And because we have nothing to protect in those old (LAUGH) legacy platforms, we're hyper aggressive about this. And customers love it 'cause it saves them tons of money.
MARIA BARTIROMO: Yeah, that makes a lot of sense. But I guess the point is with-- as it relates to enterprise, when you're talking about the leader in the business, IBM, even struggling to hold onto the number position, and you just said it a moment ago, it's fractured. You know, nobody has 4% of the market. How does Dell do it when, in fact, the leader in the business, IBM, is struggling? And, you know-- have you left the larger companies on the cutting room floor? Are those deals already locked up-- with IBM and HP?
MICHAEL DELL: No. They're not locked up at all. In fact-- two days ago we just won the server business for one of the two or three largest banks in the world. So we're absolutely in there with the, you know, largest companies in the world, winning new business every single day, and very aggressive with those customers.
Again, the same solutions that we're building can scale to you know, to those very large businesses. We just see that all the growth in employment, certainly all the new startups-- you know-- they're consuming an enormous amount of technology and they're rapid adopters of technology.
MARIA BARTIROMO: I was really surprised to recognize that Amazon Web Services is really aggressive in this space. You know, I know technology (LAUGH) is really aggressive and it's competitive, but man, Amazon is really trying to eat everybody's lunch. How do you compete with an Amazon?
MICHAEL DELL: Well, you know Amazon's been a great customer and we've provided them a lot of equipment for their Cloud, as well as many other public Clouds. You know, there are thousands-- tens of thousands of Cloud service providers. And Dell's been fortunate enough to provide the infrastructure for a significant, you know-- number of those customers.
We have actually over 50% share in the segment that those products sit in. Kind of the ultra-dense data center space. Dell's been absolutely a leader in that space. So we continue to innovate and power those kinds of Cloud environments. And sure, there are shifts going on in IT constantly. That's what creates op-- the opportunity.
You know, we've got tremendous capability in helping customers manage a multi cloud environment. And importantly, you've got to also secure and protect all this data. And this is an area where we've built a substantial business, managed network security, protecting those networks, identity and access management, data protection and data encryption. All sorts of things that are extremely important if you're the person responsible for protecting a company's intellectual property.
MARIA BARTIROMO: You said one of the priorities, and certainly opportunities, is the emerging markets. Now, of course, we know that the emerging markets have been slowing down quite a bit from the peak levels of a few years ago. Tell me what the opportunity there is, and specifically what emerging markets are you betting on?
MICHAEL DELL: You know, we've been-- you know-- in these markets for decades. And we're really not concerned with the next-- quarter or two. We're thinking about these markets in-- in-- in five, ten, 20 year increments. And we just see what happens in these markets is that-- first of all, any country in the world, they have banks, you have governments, they have retailers, they have financial services. They have telcos.
All of those organizations need enterprise class IT that Dell provides. And so, we're all over that. I was in Africa last year. We've got more than a $1 billion business growing rapidly. You can see that business becoming a $2 billion, $3 billion, $4 billion, $5 billion business. Tons of opportunity in Southern Asia. So what we see is the next billion users are not going to come from the developed markets, they're coming from these emerging markets. Yes, they're volatile. They go three steps forward, two steps back. And, you know, that sort of thing. But basically over-- a long period of time, enormous growth in these markets. We've built very substantial businesses in China and India, Brazil. And so, we believe in those markets for the long term.
MARIA BARTIROMO: But, you know, I mean, when you look at the emerging markets, I could understand the opportunity, certainly. And particularly in some of these regions where there's real population growth. But why wouldn't all of those people just get a mobile phone and get their access to the internet that way? Why do you think the emerging markets, with the population growth and the tremendous potential demand, why do you think that's a PC story, when we know there are 6.6 billion mobile phones on the planet, and only a billion PCs? That's where the growth is, mobility.
MICHAEL DELL: Well, Maria, I'm very happy when people buy mobile phones in China because when you get your mobile phone, there's nothing on it. To get the data, it has to come from a server. So to use the China example, one of our biggest customers in China is a company called Ten Cent. They provide services only to people that have those mobile phones.
So, you know, every time a new mobile phone gets fired up, it is pulling on the infrastructure for networking, for storage, for servers, for security. Those are all businesses where Dell has a very strong foundational presence, we're investing to grow. And, you know, that's fantastic. What I'll also tell you is that there are some things that you can't do-- with a mobile phone, right?
And if you look around the world today, there's a lot of work that occurs other than on mobile phones. And, you know-- a way to think about this is transportation, right? You have shoes. You have a car. You got trains, boats, planes, rockets, you know. Who knows, what-- other ways of trans-- transporting.
Because you get shoes, doesn't mean your bicycle goes away. You know, you get a car, the bus, the plane, the train doesn't go away. There're many forms of computing, right? You've got computing in the Cloud, you've got, you know, computers that you take with you, small ones that you wear, machine to machine communication. Computers talking to each other. You g-- you go out 2020 you got-- seven billion devices all-- I'm sorry. Seventy billion devices all talking to each other.
You've got to store all that data somewhere. Dell ships more terabytes of storage than anyone in the world. You've got to protect it. You've got to manage it. And most importantly, you've got to derive value from it-- so you get insight. You know-- everybody talks about big data. Texas we just call it data 'cause everything's big here. But what you really want is you want big results. You want big impact.
And you want bi-- you know, better outcomes for your patients, for your students, for your customers, for your business. That's what Dell is all about. That's what we do for our customers. And that's what we're going to turbo charge-- now as a private company. So--
MARIA BARTIROMO: So in other words, you--
MICHAEL DELL: I couldn't be more thrilled.
MARIA BARTIROMO: So in other words, you feel no pressure, Michael, to actually have a mobile phone, to have some, you know, m-- put Dell's face on some mobility product out there? I mean, you know you're not planning. You spent $13 billion on acquisitions so far. Can you acquire-- a phone company? Can you acquire mobility?
MICHAEL DELL: We'll continue to make acquisitions. You know, Dell has a very strong balance sheet. We generated over $22 billion of free cash flow in the last five quarters. And-- over $4 billion-- just in the last-- t-- 12 months. If you look at our investments, they've been in the enterprise, they've been in the data center, in security and software, in systems management. And, look, this $3 trillion industry going to $5 trillion, $6 trillion is enormous. You don't have to play in every single space. And-- you know, we're certainly-- happy to go play in other areas where we think we can do a great job for our customers.
Customers want us to help them -- you know, protect, secure their data on any device. And-- you know, this company can absolutely grow and be just fine without being in the mobile phone business. I will say we do sell-- you know, mobile phones. We sell third party mobile phones, Dell.com/SmartPhones if anybody wants to-- wants to buy one, you can-- you can go check it out.
MARIA BARTIROMO: You found a partner in Silver Lake Partners -- you said on the call yesterday, you said, "Significant incremental investment is required to turn around the company. And having two strong private investors will aid in that restructuring." Tell us, how much input will Silver Lake have on strategy?
MICHAEL DELL: Silver Lake and I are partners together in this. You know they're a fantastic firm with a deep expertise in technology. And-- you know, it's a great relationship that we have. I'm certainly in control of the company. And I value their input and their help and advice. And we're working together to make the right investments on behalf of our customers, to grow this business and, you know, continue to create great results for our customers every day.
MARIA BARTIROMO: What's the timing on this? And I recognize now, taking the company private, the point is to not have the pressure of quarterly expectations and the pressure of analysts out there. But, you know, I mean, you reported a 72% decline in quarterly earnings-- you know, last month. You've got the PC businesses that everybody's talking about, having-- you know, is con-- going to continue to shrink. Some people will out and out say, "PC business is dead." How are you going to get margins in a better position?
MICHAEL DELL: You know, we also reported-- $4 billion-- over $4 billion of cash flow in the last 12 months. Up quite substantially from the prior 12 months. What I'll say, Maria, is that, you know, since I started the company, we've had revenues of $765 billion, maybe a little more than that. You know, this is a company that's going to grow, will generate substantial cash flows. We have a strong balance sheet. A profitable company. We're going to invest in the business.
We're-- we believe we're well positioned. Investments are needed and we're going to accelerate those as a private business-- you know, controlled-- essentially by me. And-- you know, with help of a fantastic team, enormously supportive customers I'll say. Through the-- whatever disruption and things that were going on, I received tremendous support and outpouring of support from our customers.
MARIA BARTIROMO: I'm sure you did. And, of course, throughout this Carl Icahn was out there on the airwaves, saying well, you know, his deal was better. It was-- it which contentious out there. But, you know, a lot of people I spoke with, Michael, they never even doubted you would-- you would not, you know, take this to the end.
You were never going to walk because at the end of the day, your name is on the door. Is this really about your legacy and not about growth at all, but really about the fact that you founded this company, your name is on the company, and you are looking at your legacy and need to turn this around?
MICHAEL DELL: You know, we're building a great business here. That's what I've been doing for the last 29 years. That's what we're going to continue to do. You know, a lot of people said a lot of things about the company, you know, during this process. I'll sort of set that aside and just say, "I think we have a fantastic business and I remain optimistic and have-- you know, what I believe is a great, forward looking vision for the company. We're going make the investments.
And, you know, this is the company that our customers love, right? And-- we-- are honored to serve -- you know, tens of billions of customers around the world. That's really our passion. 100% of our energy will now go into that. And all these other distractions are sort of falling by the wayside.
MARIA BARTIROMO: Right. But, I mean, here's a company that you founded in a garage. You took this company to become one of the leaders in the PC business on a global scale. Your name is on the door. Is the point here to take it private, fix things, lead this company to where you need it to go, and then take it public once again?
MICHAEL DELL: Couldn't afford a garage. I started in a dorm room. You know, we're very focused on doing the right things for our customers, growing this business. I believe we have some great foundational businesses. We'll make the right decisions, you know, in-- in-- in the future. As I said, you know-- revenues to date, over $765-- billion. So, you know, maybe when we get to $1 trillion-- it's coming soon-- I'll come back on your show, we'll have a chat about that.
MARIA BARTIROMO: Yeah, I want to have a chat about it. Let me get your take on the macro environment, Michael, while we're talking about this. You know, Europe-- debatable whether or not it's turned. What are you seeing in Europe? What are you seeing in emerging markets right now? I mean, on the macro level the results appear to reflect a continual-- overall-- sluggish tech spending environment last time you were out with earnings?
MICHAEL DELL: There're certainly challenges out there. Again-- we sort of look at this and say we can't really control central banks and all those external factors. What can we do with our customers to bring them more value, bring them more capability and more services? Help them connect all their devices together? Help them get value from their data? You know, help them-- really transform their business into agile Cloud type environments? Help them secure all this-- and that is how we grow.
And, you know, if you look at our deferred revenues last quarter-- they grew-- I think about 7% in enterprise service and solutions software business group 9%. That's quite favorable to-- others in our market. And-- you know, we're excited about our growth prospects, making the right investments, focused on the long term.
MARIA BARTIROMO: So what's the toughest part of it? Is it the federal spending? Is it Europe? Is it-- emerging markets? What's the toughest nut to crack?
MICHAEL DELL: Those are all areas that-- that are experiencing-- challenges at a macro level. But again, we see opportunities. You know, when-- a federal agency has a budget challenge, well-- you know, the answer isn't necessarily don't spend any money. You know, the answer would be, well, how do we actually save money? How do we get out of something that's incredibly expensive and go to something more efficient?
And I think this is why you saw our enterprise and solution into service business growing fairly significantly, while others-- you know, are actually shrinking. And so, you know, they're selling a legacy of the past. We're selling the future. And we're totally grounded in these Cloud, virtual software defying kind of systems. That's where the growth is.
MARIA BARTIROMO: Yeah. Talk to us about the overall landscape right now, in terms of where the growth is. You know, we see Twitter going public. We see social media on fire. You know, of course, lot of talk about the Cloud. And yet, margins on a number of companies and don't seem to be there yet. Dell included-- in terms of-- the Cloud. Assess the landscape for us-- in terms of technology right now. Where is the growth?
MICHAEL DELL: There's definitely growth in mobile. And that's not just dev-- you know, growth in the – itself. (LAUGH) It-- as I mentioned earlier, it's driving an enormous wave of infrastructure, security, content, data. How do you translate that data into value? How do you transform businesses using all the-- you know, the-- you know, enabling all these mobile workers, mobile consumers? Enormous opportunity there.
Certainly Cloud you know is a big trend in our space. And there're many types of Clouds. Public Clouds, as you mentioned earlier. We see enormous growth in private Clouds-- as well. We have-- a move to virtualization and software defined, data centers. You know, that's certainly-- a big area. Companies gaining value from all their data.
And then, you know, the thing that people don't really like to talk about as much is IT security. The cyber war, the cyber threats. Here Dell is protecting, you know, 5,000 or more of the largest banks, insurance, financial services, pharmaceuticals, manufacturing. Anybody with valuable intellectual property, governments, et cetera, comes to Dell to protect their network.
And, you know, we see-- tens of billions of security events per day. So we have an unprecedented ability to help customers protect all this information. Whether it's through our managed security services or our next generation firewalls, or identity systems because as you have all these Cloud systems, you know, your data all over the place, how are you going to actually know who's using what data? Some data you need to really protect and keep close inside a company. You want it on a cloud provider. How do you encrypt it and protect it? These are all areas where Dell's investing heavily to enable a new kind of IT.
MARIA BARTIROMO: It sounds incredibly exciting. Did you ever think when you were starting this company three decades ago in that dorm room, that you would be here, talking about taking the company private after taking it public, and perhaps there's another public offering (LAUGH) down the road on the horizon?
MICHAEL DELL: No, I didn't. I didn't think about this, you know, 25 years ago when -- when we went public. But I still have the prospectus on my desk and it's fun reading.
MARIA BARTIROMO: I bet it is. Michael, we know it's an important and trying day for you. Thanks for spending the time with us.
MICHAEL DELL: Thank you.
MARIA BARTIROMO: We'll see you soon. Michael Dell, joining us.
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