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Michael Dell Talks Up Services, Windows 7 — But Trashes Netbooks

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“The technology industry is always going through transition, and there are some big changes going on now,” said Dell Computer founder and CEO Michael Dell in Silicon Valley Tuesday night. He spoke onstage at a Churchill Club dinner event in Santa Clara with Wall Street Journal reporter, Don Clark, after making another appearance in the very rainy Bay Area earlier in the day at Oracle OpenWorld. Dell addressed a range of topics, including shifts going on at his company, the far-reaching impact of virtualization, acquisitions, the upcoming Windows 7 OS, netbooks and smartphones. His comments on netbooks were especially surprising.

Shifting Toward Services

Dell described his company as “somewhere in the middle” of a broad-based shift toward focusing on services, solutions, the enterprise and emerging countries. He said Dell’s recently announced $3.9 billion acquisition of Perot Systems is directly focused on offering services to enterprises. Hewlett-Packard and IBM have been building such services business for years.

By way of example on the services topic, Dell said that “one of the big things going on in this country is that physicians are trying to figure out how to get electronic medical records, which is not an easy problem.” He said that Dell and Perot are already focusing on solving that problem through Software-as-a-Service (SaaS) solutions. Perot Systems already manages the technology at place in many hospitals, he noted.

The Promise of the Refresh Cycle

Dell made plain several times that he sees the installed base of technology as very old, and sees a coming “refresh cycle,” for which he has high hopes. “The latest generation of chips from Intel is strong, particularly Nehalem,” he said, adding, “and Windows 7 is on its way.” (The operating system arrives Oct. 22nd, although Microsoft’s large-volume licensees are already getting it.) He pointed out that many business are running Windows XP, which is eight years old.

“I’ve been using Windows 7 for a long time now,” he said, “and if you get the latest processor technology and Office 2010 with it, you will love your PC again. It’s a dramatic improvement.” On the topic of the PC, Clark asked Dell how much attention he pays to Apple. “I think Apple raised the bar on product design, and we’re certainly paying much greater attention there than we were a few years ago,” he answered.

Netbooks? What Netbooks?

One of the biggest surprises in the session with Dell was that even though his company has some well-received netbooks, such as the Mini 10v, he really didn’t have one positive thing to say about them or the fast-growing netbook market. “With the netbook,” he said “if you take a user who is used to a 14-inch or 15-inch notebook, and then give them a 10-inch netbook, a few hours later they want their big screen back.” He characterized netbooks as “not a replacement for a high-end machine for an experienced user,” and noted their “slower performance.”

Smartphones in China

Dell was quick to mention the Chinese technology market many times during the evening, which he characterized as doing well, along with other Asian markets. When asked about Dell’s intentions in the smartphone market, he noted his company’s recent demonstration of Android-based smartphones for China Mobile, the largest carrier in China.”They asked us to develop a smartphone based on a derivative of Android,” he said.

Dell also noted, however, that his company can benefit from growth in smartphones in places like China by being involved with service and content providers. “We have a customer in China called Tencent [an Internet service portal] that has 650 million customers, serving millions of cell phone users. Through them, we participate in the Internet-in-your-pocket trend. We’ve sold them enormous numbers of servers.” On the topic of selling servers in volume, Dell also noted that his company has sold thousands of them to Facebook.

Virtualization: Promise, and Challenges
Clark asked Dell about the fact that, through virtualization, many companies end up buying fewer servers, and less hardware in general. “The first thing you have to remember is that any time a new technology comes along that’s good for customers, you get in the way of it at your own peril,” Dell said. “We have to think about how to win in virtualization. So let’s do virtualization right in servers. We’re offering servers with 1-terabyte DRAM footprints. You can virtualize an enormous number of servers with that, and you can put your whole database in memory.”

33 Responses to “Michael Dell Talks Up Services, Windows 7 — But Trashes Netbooks”

  1. Unless Mr. Dell wakes up to the fact that the company that was known for excellent tech service, now has the most abysmal service in the industry, just read all the blogs Mr. Dell, Dell will continue its downward trend. I for one am ready to disconnect from Dell, due to the totally unresponsive, unknowledgable, tech support in the business. The tech people in India follow a written script, and have no real knowledge of computor problems if its not written out in the form of “questions and answers on their screen of repair “Q & A’s. I am in need of a new computer, but will not order one from Dell until they can demonstrate that they are capable of fixing the one I now own. Anyone have a better experience with H.P. ????

  2. Nobody to comment on Windows 7? (the real issue)

    Michael told us that:
    “if you get the latest processor technology and Office 2010 with it, you will love your PC again. It’s a dramatic improvement”

    Sure, a $3,500 PC (with again a new Windows license) is cool -for the vendor. But where is the advantage for users to pay (again) for something that sucks (far) more electricity than Ventura Publisher on GEM/DR DOS -which was available, ahem, 20 years ago to do a better job than MS-Word 2010?

    Why are we told that we need (to pay for) a Cray computer to type-in a letter?

    Are we all that stupid?

  3. People are over reacting to his comments about netbooks. The slowness issue shows a bit of ignorance on his part, but that’s okay. I think he’s missing the point. Give people their 3 lb portable computer and then give them back their 5 or 6 pound computer and see how much they enjoy taking it out. Once you go light, you can’t go back. His real point is that netbooks are not a replacement for a home computer. That I agree. They are not. Laptops and notebooks are those machines for the home. It’s just a new reality for people and some are having difficulty coming to grips with what was, and what now is portable.

    • It’s like the difference between a car and a bike.

      You get wet when you’re riding a bike. Why would anyone want to ride when you can stay dry in a car?

      Or why would anyone want to ski when you could take a bus?


      • I think you are one of those people who don’t think outside the box. You are in a comfort zone, and can’t be bothered to move beyond that. Age has something to do with it usually. You miss the point and the new portable concept. That’s fair enough. Ignorance is bliss. When you’ve gone light, and realized what light is, then you wouldn’t be going back to what you had. I think we need to think about the evolution of computers. Do that. What has happened to computers? Smaller. Lighter. More powerful. I think you missed out on the smaller and lighter part. People who say, geez, you could just pay another $100 for a laptop, don’t get it. I have no idea what you’re argument would be when the ION netbooks arrive. I’m sure at one point you thought your Sony walkman, yes the tape playing kind, was a really cool device. Go ahead, take it out in public. You might have funny looks from people who are a bit more current. The car bike analogy? Puzzling. I guess I would suggest, have a more younger approach to thinking. You’re stuck in your car behind 100 other cars. You see the bike riding past you to their destination. Yes, you’re still stuck with all the other cars. I guess at least you’re dry.

  4. I think whether a netbook is slow or not depends on if you’re using the “small laptop” definition of netbook or Microsoft’s very specific definition that requires slow components to still qualify as a netbook to get XP on it. Remember, you can only still sell XP if it’s on a netbook, and a netbook can only be within a certain range of specs. Linux-based netbooks have no such hardware restrictions though.

  5. @John, Glen, Sara, Pedro — I think the positives and negatives you raise about netbooks are perfect illustrations of the fact that, as is true with pointing devices (some people hate trackballs, some love them) people have highly varied reactions so portable computers, their keyboards, their form factors, etc. To me, the bottom line concerning net books is that they work well for many people, for certain tasks. I like them for writing on the go, but would never use one as my primary portable.
    That’s why it was surprising to hear Dell put them down so flatly. He sells them, and people buy them and like them!


  6. John Doe

    I hate netbooks with a burning passion. The keyboards are tiny, the performance abysmal, and the oft-touted long battery life is virtually a non-issue, given that there are power outlets almost anywhere where one would bring the thing out. Who else can’t stand the click-click-clack of a loud in-class typist hunched over and taking up another half-space with their elbows on account of the tiny font? Besides that, they promote multitasking, which has been suggested to contribute to stress and progressive disorganized thinking.

    No thanks, I’d rather spend $700 on an at-home gaming rig and devote time to doing homework instead of trying to use the scrap minutes throughout my day.

  7. The attraction to the netbook (for me) was 9 hours of use on a single charge. Add to that I can carry it much easier than an actual laptop (which I do carry to work every day). For travel it is a godsend. I don’t have to worry about my big laptop bag getting crushed, it just goes under the seat and yeah I can pull it out and watch movies, work on docs, email and (with delta wifi in air) vpn into work and get some work done on a 4+ hour flight. Or just cruise the internet. The two things that sell netbooks – portable and battery life. It’s funny how Dell can downplay a netbook and brag about mobile phones with android…which is basically a wimax connected OS on a small portable computer…that is harder to type on and has a smaller screen than a netbook.

    Virtualization has it’s place but there is a limited ROI on what you can get out of a server. How much is thier 1TB memory server + ESX and the licensing costs+storage+san fabric etc.

    • Glen, you underplay the effects of virtualization. Let me flip your cost assumptions on you,when you virtualize your hardware + software costs should be equilevant to your non-virtualized hardware + software costs. Where the savings come in are in the HVAC and electrical usage department, which are an under appreciated cost that most IT departments do not capture. Generally this cost goes under building maintenance, where is should be is part of the operating budget of IT. Thus IT can make a more accurate portrait of what adding a server for Sally in HR will really cost.

      Plus, most of the virtualizations in the SMB market, all of sudden get a real disk solution versus files stored hap-hazardly across many different servers. Remember that in this market (SMB) GigE is cheap and the debate between fiber SANs and GigE SANs is over. GigE won. (Yes fiber is technically better, cost versus performance is just not there to justify fiber when GigE is 90 – 95% as effective). In a large corporate environs, the debate about a SAN fabric is a real one involving brocade switches, etc, etc. In the SMB environs, this is usually not the case. In SMB markets, it is usually a couple of small SAN boxes from Dell connected over broadband for disaster recovery deltas and that is the extent of the SAN fabric.

      The other issue that this cascades into is backup planning and licenses. With storage now consolidated, you no longer have as many backup agents and licenses to consider.

      When painting a broad brush of virtualization, it pays to look at the whole picture. Not just the servers and software.

  8. Netbooks are great. I don’t understand why people don’t understand. For $100-200 sure you could get a laptop or desktop, but what good are those when you want something like with 6-10+ hours of battery life?

    The netbook market is the fastest growing market so it’s not just a fad.

    I don’t know what you guys do on your netbooks but mine works fine and doesn’t get all laggy as many claim.

  9. a 13” or 14” laptop is still ultra-portable, ultra-light and ultra-fast. They fit on a small backpack and are light enough to carry around without perfomance (or health) limitations.
    Netbooks are great for some users, but not for most. They dont replace a notebook. They are just what the name says, for net use.

  10. I agree from a profit margin and financial standpoint but not from an end users view. My wife who isn’t an I.T pro uses her netbook all the time in front on the TV for web and email and even takes it places just to show off the latest photos etc. Netbooks big plus is their size – or lack of it.

  11. He must be trashing them because the margins are so razor-thin. Clearly he doesn’t see a use case for them. Really Michael? They are slower than high-end machines and don’t replace them? In other news, night nearly always follows day.

  12. I don’t see his comments as surprising. I think he merely stated what he feels to be a fact. While I wouldn’t disagree with his statement, he’s seems to be looking at it as comparing apples to apples. A standard laptop with 15″ screen is most likely going to be used differently than a netbook.

    • The simple fact is that netbooks are slower and their tiny keyboards make them annoying for anyone over the age of twelve to use. For a hundred and fifty dollars more you can go to 15″, and faster to boot.

      • You don’t “get it”. Yes, you can pay another 100 or 200 bux for a heavy and non portable computer. My question is, why would you do that? If you have a home computer, then why bother with an extra couple pounds? Smaller and lighter makes up the difference in power, but many people haven’t seen the light. Ignorance is bliss.