Dell Technologies Inc. (DELL) Earnings Call Transcript & Summary

[Presentation]

Please welcome, Michael Dell.

Welcome, everyone. Welcome to Dell Technologies World where ideas become innovation and where innovation changes the world. Someone somewhere has a big idea that is so powerful that it spawns an ecosystem of innovation. And in the process, new industries and new endeavors are created. New opportunities are unleashed. Right now, we have more power than ever before to turn ideas into innovations that fundamentally improve our businesses, life and the entire world. And here at Dell Technologies World, we're going to talk about how that power is growing and how it's continuing to accelerate and we'll be telling your stories about how together we are putting these powerful forces to work. So whether your big idea is curing cancer, or frictionless commerce or sustainable supply chain from small businesses to governments and universities, to 98% of the Fortune 500, to all the innovative businesses out there in between with a dream and a big idea. Look, you're in great company. You are our customers, our partners and our friends and we exist to bring your ideas to light. Last year, Dell generated $102 billion, all in service of creating value for you, $102 billion in revenue. Thank you for joining us on this journey. We are also putting our enormous supply chain to work for you. We shipped 2 units per second, 179,000 orders per day. And our customers have told us that ensuring ongoing availability of our technologies is incredibly important given the world we live in today. And we have built one of the most resilient supply chains in the world with the strength and scale to be the partner you trust to deliver on your biggest opportunities because increasingly, technology is at the center of all of the significant opportunities in every domain. Now one of our customers, Hyundai is the world's third-largest automaker. And they have this big idea to reinvent manufacturing and the future of connected clean transportation. [Presentation]

I love how well-aligned we are to the goals and objectives of Hyundai and it represents really great work. Dell Technology, at our best, forging relationships, strong partnerships and a deep understanding of customers. And I'd love to introduce our senior account exec for Hyundai, June Woo. Hello, June. Thank you so much for joining us here at Dell Technologies World.

Thank you, Michael. I'm happy to be here with you and so many of our customers and partners.

June, for me, one of the things that is amazing about this story and so many of our customer stories is our ability to help customers with really a deep understanding of their needs. And I'd love for you to share a little bit about the working relationship that you built with Hyundai AutoEver.

I think a lot of our success is because our partnership starts with strategic development. For example, last year, we delivered the next wave of change leadership forum where Mr. Suh shared his vision to make his organization, Hyundai's most competent software and ICT company. Then last May, Mr. Suh joined us right here at Dell Technologies World for executive briefings and also met with you, Michael.

Yes. I remember that well, and that conversation was really a further leap forward in the relationship.

Yes. That's right, Michael. We discussed how to accelerate Hyundai AutoEver's transformation and how we can elevate our partnership to deliver the full value of Dell's end-to-end capabilities. In meta factory, covering the areas of metaverse, Digital Twin and Edge, next-generation data center, data management, R&D, cloud platform architecture, security and most recently, manufacturing Edge transformation. They've done a technical validation of Hyundai AutoEver at software on Dell Edge gateways and now they joined the Dell Edge design program of Project Frontier, leveraging Hyundai AutoEver's software capabilities and Dell Edge solution portfolio. We can really think through how to provide the integrated solutions that go beyond meeting technical requirements to support Hyundai AutoEver's overarching business objectives.

That's fantastic, June. Thank you for being a great advocate for Hyundai's success, and thank you for joining us here today.

Thank you

Thank you. Hyundai, like all of you, is working to harness the enormous quantities of data at the Edge that is being processed and protected and used, right at the point of creation. And as we all know, the amount of data is exploding and its value is increasing, especially when we activate it with another really big idea like artificial intelligence. AI, just like the PC, the Internet and a smartphone before it will transform industries and the way we live and work. And if you're curious and you like to learn, look, there's never been a better time to be alive and never a better opportunity to make yourself and your organization smarter and more productive. Now you can quickly find the limitations of these models and of course, we have to ensure confidential and proprietary data is protected. And yes, there are dangers with these technologies that we have to manage thoughtfully and responsibly and make sure that these technologies reflect our human values. But I'm more of an optimist. In throughout human history, we've successfully managed the risk of potentially existential technologies and throughout human history, technology innovation has driven human progress from health to education, to sustainability, to prosperity, our measures of progress are bound to our innovations. And of course, we're also finding that with these generative AI models, they get much better as you add more data and add more processing power. IDC estimates that by 2025, 88% of the servers used for AI workloads deployed at the Edge will be used for inferencing. And to support this, we're going to need new architectures with orders of magnitude, higher speed and efficiency. And we are ready with rugged, compact and powerful servers designed for AI workloads for the Edge and for telecom. And for your clouds and data centers, we're first to market shipping in volume now with the PowerEdge XE9680. Stay tuned, you're going to hear more about this later. It has 8 NVIDIA Tensor Core H100 GPUs, currently the world's fastest available. Now there will be a significant proliferation of open and close source large language models for both specialized and general uses and they will be distributed globally. Organizations will have many of their own private large language models to unleash the power of their secure data. Take a bank, for example. It wants to calculate credit risk, it wants to enhance customer service and improve fraud detection. Those are relatively simpler problems to solve. Now it doesn't really need its data to create beautiful artistic images or write poems or now all sorts of other random things that have nothing to do with the business of the bank. Enterprises are going to be able to train far simpler AI models on specific confidential data, less expensively and securely driving breakthroughs in productivity and efficiency. And while those breakthroughs are really important, the real opportunity is to reimagine your organization and what you can become given the superpowers that AI is unleashing. And if you're not already using AI across your organization and thinking deeply about reinvention, you're already behind. That's why AI workloads are the fastest-growing part of our cloud and infrastructure business. And tomorrow, right here on stage, you're going to hear from Jeff Clarke, and he's going to be speaking with Jensen Huang from NVIDIA about all of this and much, much more. You will not want to miss it. Look, we hear you loud and clear when it comes to the importance of AI just like we hear about your opportunities with the future of work, with Edge, with multicloud, sustainability and security. We call it having big ears. Around the world, Dell Technologies has more than 65,000 dedicated account and service professionals listening to you every day. And each week, we have millions of customer interactions. Each one of those is a valuable data point that helps us understand our customers better so that we can focus our over 20,000 engineers on the technology innovations that matter to you most. And over the next few days, you're going to be hearing a lot about how we're bringing our customer-inspired innovation together with our ecosystem of partners, so you can make smart choices from the Edge to the cloud. Because there's no one answer for every workload, but there's a right answer to optimize every workload for performance and cost. Now imagine the future where all of the clouds and the Edge come together and look like one system. To make this happen, we'll take an ecosystem. And our ecosystem keeps getting stronger and bigger and broader. PowerFlex is our developer-friendly software-defined infrastructure built for multicloud and it provides unmatched performance and scalability, enabling you to scale compute and storage independently or together with any hypervisor or container platform on-premise and in the public clouds. And like PowerFlex, all of our storage, compute, Edge security, data protection and data management solutions are designed to connect with all the elements of the multicloud system you depend on. Multicloud by design isn't just a tagline. We're making it real. And here at Dell Technologies World over the next few days, we will release the largest expansion ever to our APEX offerings, bringing customers a modern cloud experience and consumption model built for multicloud. Now partnerships have been at the heart of our philosophy and no partner has been on this journey longer with us than Microsoft. And today, we have a couple of really exciting announcements to turn the big idea of multicloud into real innovations for you. I recently was able to sit down with Satya Nadella to talk about our joint cloud strategy as well as the future of work and generative AI.

Satya, thank you so much for joining us today. Microsoft has emerged as a major cloud player with your leadership. And today, we've got some really big cloud news to share. I'm super pleased to announce, first of all, that we're bringing our industry-leading storage software to Azure with the APEX block storage for Azure. We're running on-premise with a new service, our APEX cloud platform for Azure. And look, these are great examples of how Dell and Microsoft are working together to give customers the freedom to choose when, where and how they run their workloads, whether it be public cloud, on-prem, Edge and beyond, driven solely by the needs of their business. And we're super excited for what this partnership means for our customers. This is something our customers have been asking for, and we're grateful to be able to deliver it together.

It's great to be at Dell Technologies World with all of our mutual partners and customers. And as you sort of rightfully captured it, right? We have been working on many parts of our sort of tech stack together, whether it's on Windows 11 and the PC innovation or Microsoft 365, and of course, the cloud technologies. And today, what we have done with and what you have really helped bring to market with APEX cloud platform with Azure is just a breakthrough. I mean, I think you just captured it very well when you said what customers really want is the seamlessness of the Edge and the public cloud coming together. And this technology truly takes all of Dell's innovation and operational excellence and some of the technologies we have, packages it together so that all of the sensitive workloads in private and public sector can now have the options to deploy where they want with the same seamlessness of the control plane. So very, very excited to be partnered with you on bringing this new product and technology to market.

And Satya, you mentioned Windows 11, obviously, a core foundation of the Dell-Microsoft partnership for decades has been making customers more productive and certainly the pandemic accelerated the need for modern work capabilities. And together, we're very focused on building the next generation of intelligence, secure PCs that deliver new collaboration experiences, new levels of performance, obviously, in close partnership with Microsoft through Windows 11 and Microsoft 365. So tell us a little bit about how you see the nature of modern work evolving and especially how do you see AI and other emerging technologies fueling this.

When will the next time information technology truly drive economic growth and productivity and I feel this AI age, I think it's kind of more akin to when PCs first showed up at work and change the workflow, right? We all remember the days before word processing and spreadsheets and e-mail and after. And so I think this generation of AI will have a similar effect, both at the individual productivity, right? I mean this idea of having a co-product, whether you're writing code or you're writing a document or triaging e-mail or designing something. Having a co-pilot help you remove the drudgery of the work and improve the flow and creativity at work, I think, is going to be breakthrough at an organizational level, right? If you think about salespeople or marketing people or finance people, all being able to come together and really accelerate the work they do or even at the industry level, removing the doctor burden when it comes to how they take care of their patients by having the co-pilot, help them transcribe the medical record. All of these things, I think, are going to have transformative effect. But the most interesting thing is the largest installed base of devices that are capable of doing the most ambitious AI today, guess what, are the PCs and so that's where I look at it and say, going forward, we are designing everything at Microsoft -- across Microsoft 365 with this co-pilot design point where the user is at the center, we're going to accelerate everything on Windows. And so that's why the innovation that both of us are working on with Windows 11, Dell PCs and things like Microsoft 365 co-pilot or GitHub co-pilot are going to have a real transformative effect on economic productivity all over the world.

Awesome. Thank you so much, Satya. We look forward to delivering all of that to our customers together.

Thank you so much, Michael. Thank you for the partnership, and thank you to all the folks who are attending Dell Technology World because to us, being able to not just build technology, but getting into your hands so that it can have the broadest impact is what gives us a sense of purpose and mission come. So thank you so much for all of the opportunity.

Microsoft and Dell Technologies have a remarkable partnership. And over the next few days, you're going to hear from a constellation of leading partners who are working with us in an innovative way on another really big idea. And that is making your technology simpler to manage, own and operate. This way, you could turn your ideas into innovations that will define your future even when those ideas are way ahead of their time.

Now let's travel to the world of Pandora, where innovation brought by James Cameron and Jon Landau's vision for way of water was brought to light after a 13-year journey.

I think the biggest practical shift in our production is we are 100% digital. And the volume of data that we need on this film to make it a reality is tremendous. And without the technological resources that are available today, we could not have made the movie.

Going into Avatar 2, we captured probably 10 to 15x more data than we did at Avatar 1. We're capturing as much data about a characters performance or a scene as we can. We're capturing 26 reference cameras at the time, we're capturing stereo facial camera from every performer onset or capturing audio. We're capturing motion data. We're capturing the motion data of the camera that Jim is operating.

We are working in 2 different continents. We're working in Los Angeles. We're working in New Zealand. And we need to be able to share everything that we hold digitally to make these movies. Knowing how much that we would rely on data, we were looking for a gold-standard partner and Dell turned out to be the perfect fit. We chose Dell Technologies because of the quality of the technology that they offer. But just as importantly, it was the people who understood our goals and objectives and wanted to work with us in a partnership to achieve them. As we move into each of the Avatar sequels, we're going to go to new biomes, we're going to meet new clans. There's going to be more data that needs to be stored that needs to be preserved, that needs to be accessed for future generations.

As we get more sophisticated as new technology emerges, our appetite for what impresses us grows. But that's why we like partners like Dell.

Later today, Alison Du will share the stage with James Cameron and you'll definitely want to check that out. Now I love the story because it highlights the true strengths of Dell Technologies as a partner and as an innovator. We solve some really big problems from exascale storage, the processing power required for these incredibly advanced renderings. To collaboration tools from a team working around the world and around the clock. Now think about Hyundai and Lightstorm, their ideas and innovations are defining the future of manufacturing, advancing art and entertainment. Both are prime examples of advancing human progress enabled by technology. That is our purpose. And it's our greatest privilege to be a part of such powerful stories, your stories. It inspires us every day to keep at it, to keep realizing your greatest opportunities to create, innovate and move forward. Once again, welcome to Dell Technologies World. We are thrilled to have you with us from the future of work to AI, to Edge, multicloud, security and sustainability. We have a perspective, we have a strategy, aligned innovation and an open ecosystem. And we're excited to share what this can all mean for your big idea. So let's get on with the show. And I can't think of anyone better to share our technology vision and innovation with all of you than our co-COO, my friend and counsel and one of the keenest minds in the business, Chuck Whitten. All right, Chuck, it's all yours, and I'll be back out in just a few minutes. Take it away.

Well, thank you, Michael. And hello again. I stood on this stage for the very first time last year, and it was an honor then, and it's an honor now. Last year, I talked about our purpose to create the technologies that drive human progress. And I talk strategy how through a series of different and contrarian bets, we've built a company that looks like no one else in technology, an end-to-end leader built for this moment in tech. And I talked about how when our purpose and our strategy come together, it demands that we tackle the unsolved problems of technology because when we do, it creates room for you to innovate and go change the world. But that was last year. This year, it's not just about vision and aspirations. I don't really need any fancy graphics or sound effects. Well, I mean maybe, look, we're in Vegas after all, right? But in all seriousness, today, I want to talk about the tangible innovations we're delivering to solve your most pressing challenges, those unsolved problems. And over the next couple of days, my partner, my mentor and my friend, Jeff Clarke and I will share what we've been working on, including some exciting news and demos that bring it all to life. But let's start with your unsolved problems because like everything else in technology, they continue to evolve. So over the last year, I've spoken with hundreds of customers and partners around the world. It's one of the most inspiring parts of my job, and there are 5 challenges that I hear over and over. First, there's the future of work. At the start of the pandemic, we quickly deployed disparate devices, applications and collaboration tools as we all pivoted to working remote. And we all became part of the greatest re-imagination of work since World War II. Today, companies are having rich conversations about the future. Where does hybrid work go from here? And how can technology enable the next evolution and the next and the next? Then there's multicloud. Last year, we talked about delivering the innovations and ecosystem to change the game in multicloud. And since then, you've affirmed and reaffirmed that we have the right strategy. You are deploying sophisticated hybrid and multicloud strategies. You want the feature velocity and innovation of the public clouds, but you don't want to be locked up in a single public cloud. So you're smartly putting the right workloads in the right places, which means you have clouds everywhere, on-premise, across multiple public clouds, at the Edge, in co-location facilities. You're increasingly using FinOps to understand trade-offs between speed, cost and quality, in your cloud architecture and investment decisions. And as you optimize, you're going after the real prize, extracting value from the explosion of data sprawled across your multicloud estate. What you need is somebody to make it all work better together to make it multicloud by design, not by default. Michael talked about the power and promise of AI. So I'm not going to spend a ton of time on it. What I know your feeling is pressure, pressure to move faster, to apply generative AI to your private data sets and to do it all smartly, securely and ethically. How about the Edge or as I like to call it, the real world? The perfect storm of data, technology and competition is accelerating innovation at the Edge. The problem? The Edge is everywhere, and it's hard to operate Edge infrastructure at scale. Existing models don't solve the challenges of running multiple critical and disparate OT workloads, operating in remote and harsh environments, operating without skilled local IT, managing distributed infrastructure and applications and doing it all securely. And finally, their security. Distributed work, distributed data, multicloud, the Edge, the attack surface has never been bigger. And unfortunately, the security industry has never been more fragmented or more broken. Now you've been clear, don't give us more security products, embed greater security and resiliency into Dell's core solutions. Basically don't get into the security industry, Dell, change the security of the technology industry. So these are the 5 big challenges that we know you're grappling with. And consequently, where we focused our innovation since we stood on this stage a year ago. And I should also mention that cutting through all of those challenges are a few timeless, high expectations that you've set for us. You've asked us and the world to be more sustainable. This is no longer style point. Sustainability is at the top of your strategic agenda. You want a modern cloud and modern consumption experience, that's APEX and we hear that you like it and you'd like to see it across our entire portfolio. And finally, you need help stretching your scarce IT investments in what is a challenging macroeconomic environment and at a time when technology has never been more essential to your business. So that's our agenda because it's your agenda. So today, I'm going to go deep on the future of work and multicloud, the core elements of our client and infrastructure strategies. And tomorrow, Jeff and friends will demo some of what we've talked about today and share what we've been up to in generative AI, the Edge and in security. Jeff's got an awesome keynote plan tomorrow, you're not going to want to miss it. So let's turn to the future of work. Let me start by saying we're uniquely qualified to discuss this topic. We are the market leader in PCs and our business is overwhelmingly focused on the enterprise. That means we wake up every day thinking about your people and the IT department that supports them. That's a deliberate decision, that's strategic focus. Now we all know the dynamics of work are forever changed. The remote and hybrid working patterns of the pandemic, combined with years of technology innovation, have fundamentally changed people's expectations of work and companies are struggling with where it goes from here. So let me give you the answer. The answer is, there's not one answer. There is no one size fits all. Every company has to decide what works for their culture and in their competitive environment. But more importantly, there is no one size fits all for work inside a company. Within your organizations, there are different employee personas with very different needs. Putting ourselves in the shoes of today's new hybrid workforce, the dialogue needs to evolve and the tools have to evolve to. So to that end, I wanted to invite to the stage our best subject matter experts, the man leading the technical charge and reimagining work, please welcome Edward, President of our Client Product Group.

Thanks for joining us. Let's look at some gear. How about it? Ed, I just shared how we are unique and that we focus equally on the people and the IT departments that make up the modern enterprise. So let's start with the people. We've given you a pretty clear mission, create the absolute best solutions in the industry for hybrid work.

Absolutely, Chuck. We have a long history of delighting our end users. And we know that the bar only keeps rising in this hybrid world of hybrid work.

So let's talk about this one. What's this one?

Well, that Chuck, that's our Latitude 7440. It's the world's smallest and lightest 14-inch premium commercial laptop. It's designed for on-the-go workers. Think of sales agents in the field, Chuck. The device is just so light, so light. Weighs just a smidge over 1 kilogram or 2.3 pounds, incredibly light while also passing military-grade specs for sturdiness and durability. Bottom line, it's light with no compromise. And there's a keyboard on here, all laptops have keyboards, but this one might look like a typical one. But it's not because this keyboard, this device features the world's first keyboard using mini LED backlight technology. We use very small, very efficient mini LEDs, about the size of a grain of sand. And this technology is way more efficient. It uses up to 75% less power than standard backlit keyboards, translates into over almost 3 additional hours of battery life. We're so pleased with the performance and the mobility benefits that we've seen here. We're using this technology in most of our 7000 and 9000 series Latitude products.

It's an amazing examples of us addressing core customer needs through our technology innovation in this case, look, a lighter laptop with longer battery life.

Absolutely. That's right, Chuck. And it's just one of the many examples of how we continue to innovate and push the boundaries for our customers. I think about what we have across the entire Latitude family. From the keyboards I just talked about to the first haptic collaboration touchpad that provides a more immersive work-from-everywhere experience to Dell Optimizer, an AI-infused application that learns how you use your PC and automatically configures it for enhanced productivity. All of these innovations, they work together to give our end users the best devices for hybrid work. Now I add in a great modern OS like Windows 11. You saw our strong partnership with Microsoft earlier and the solution is unbeatable for our commercial customers. That's what we wake up every day thinking about.

Well, Ed, maybe let me pivot to another persona. So say I'm a high-ambition application developer looking to push the envelope on AI. What do we have for them?

I'm glad you asked that, Chuck, like you mentioned earlier, AI is the hot topic of the day. There's a common misconception out there that AI development only takes place in purpose-built data centers, and this just isn't the case. So let's talk about that app developer. They have to train models. They have to experiment with algorithm development. They have to do data cleaning and structuring, inference testing and more. The process is extremely iterative. It can take hundreds or even thousands of trial experiments to perfect our neural network algorithm. This is where our powerful precision workstations come into play. We offer the most effective hardware and software solutions. We support GPU and multi-GPU acceleration, CPU multithreading and more. All this power helps developers to train large AI models with anywhere from 5 million to 500 million parameters all while running AI at the Edge and controlling the training data locally.

Okay. Well, let's turn to the IT department. So whenever I talk to customers, security is almost always the first topic that comes up in a world of distributed work.

Exactly, Chuck. We have the most secure commercial PCs in the industry for a reason. Dell's Safe bios technology has defenses built in at the bios and the hardware level. Did you know we're the only OEM to provide off-host bios verification?

I did know that.