The ongoing macroeconomic headwinds have hit tech companies’ earnings, including Dell Technologies,  as customers turn cautious over rising inflation and higher interest rates.

businessline spoke with Tom Sweet, CFO, DELL Technologies to understand how the company is navigating through these challenging times.

Excerpts from the interview:


As a CFO, how do you navigate uncertain times and balance out the need to keep costs in control even as you continue investments in growth areas?

Quite frankly our customers are being a bit more cautious until they get a better understanding of what this economic cycle looks like but they are still spending because technology continues to be extraordinarily important for business model evolution and capability.

But it is a challenging time. We have taken some cost actions since last June where we restricted hiring and reduced spending. We just recently announced that we are going to reduce our workforce as we did some restructuring to set up the company for future growth opportunities and that resulted in some team members and some jabs being eliminated which is unfortunate and you never like to do that.

But it was the right decision to make to position the business for long-term success. At the same point, we have to continue to invest in the growth areas. So, my job as CFO is to say how do you balance both — control short-term spending but make sure you continue to invest in those longer-term growth opportunities.


A year ago, almost everyone was bullish about sustaining growth momentum coming out of the pandemic and ended up hiring and making other spends. Did the tech companies get it wrong about the impending downcycle?

Did we somehow miscalculate what the environment was going to look like? I think the answer is ‘no’. During the pandemic, there was unprecedented demand, and you needed to fulfill that demand and make sure you were taking care of your customers. I don’t think the underlying premise around technology has changed. 

But you and I have been around long enough to know that there are going to be pauses in the environment.  I am long-term optimistic but we are not immune to the macroenvironment right now.

We have been very much focused on controlling what we can control which is how we take care of our customers, how we continue to invest for the long term, and how we manage our cost framework while taking care of our team members, so that’s been the balance that we have been trying to work our way through.


In the global context, where do you see India in the overall scheme of things for Dell? Are you satisfied with the progress here ?

The Indian market is an extraordinarily interesting market for us. It’s the third largest technology market now and the pace of digital adoption is remarkable. We’re very bullish long-term on India in the growth opportunity that it provides us.

With the investments that the government is making, the pro-technology posture of the government in many respects, in terms of some of the regulatory frameworks that have adjusted over time, the commerce frameworks that have adjusted, this latest Production Incentive Program that they’ve rolled out to build ‘Made in India’ which we are taking advantage of with bringing incremental notebook capacity into India.

There are a lot of positives here. So, again, we’ve got to continue to build our capabilities and work with both our selling organisations and our partners but the growth opportunity is pretty remarkable.


India is looking to set up semiconductor manufacturing units. Will Dell source chipsets from India given the supply chain issues you have been facing?

We need to have the appropriate resiliency, stability, supply-chain and predictability of the supply chain. So we’ve taken a number of steps to build out resiliency.  We will continue to look for opportunities in India. But we have to see how this develops from a semiconductor perspective.

I think we are always interested in what are the sources of Silicon and if you can diversify and build resiliency. Semiconductors have been a huge challenge for the industry over the last number of years and so, again, those are long-term investments that take many years to come to market. I have to see how that develops.


There was a recent report stating that Dell is going to cut down its sourcing from China.

What we communicated to our supply chain is that coming out of the last fiscal year and starting this fiscal year, we wanted our ODMs and our supply chain to look at the sources of semiconductors from the stability and resiliency perspective and how we diversify such that we ensure that we meet our customer requirements and, so, we asked them to go look at that.

That was all we said. We’ve been pretty clear that China plays an important role for us and will continue to do so. But we also need to make sure we’ve got the right resiliency.


How are you dealing with the slowdown in the PC business? Is there any rethinking on your strategy where you focus more on the retail segment even as the commercial market is slowing down?

Let’s put some facts on the table. Pre-Covid, the PC market from a total unit perspective was somewhere in the range of 255-260 million units a year. And then Covid hits, people are at home and they need to have remote education, learning, entertainment, and that unit number jumps to like 333-340 million units.  

This year, calendar 2022, PC units were somewhere around 292 million units. So it’s still above the pre-pandemic level. It’s clear right now we’re in a downcycle on PCs. No doubt. We’ll have to see how calendar 2023 evolves.

But forecasts suggest that there is more downward pressure on the consumer space than the commercial space. If you look at our PC business, we are 75-78 per cent commercial oriented.  From my perspective, I’m less interested in total units. We are interested in the higher price bands and in the commercial space.  

We’ve done very well even in a down market. For all of 2022, we are the only OEM that has grown its share. There’s going to be some softness in it over the next couple of quarters but we’ll work our way through it. 


How do inflationary pressures, rising interest rates, and currency fluctuations impact your pricing strategy?

In general, what we try to make sure of is that we have a competitive list price and a competitive offer price across the globe.

Now, that doesn’t mean we’re always the least expensive but what we try to make sure is from a competitive position that our pricing is in line with market operators, market data, and market opportunity.

But it changes quite a bit. I mean you’re adjusting pricing pretty rapidly in the environment we’ve been in and clearly in the last 6-9 months currency has been a headwind.


Do you see an end to the current economic slowdown soon?

I have probably talked to two or three economists a week right now but I think most people have begun to rally around the fact that by midyear most think that the Central banks around the globe will be through their tightening cycle and will be in a period of stable interest rates with an idea that as you get towards the end of calendar 2023 into 2024 you begin to see interest rates drop.

We’ll have to see how the macroeconomic cycles play out and quite frankly I can’t control that. So, I’m very much focused on what we do as a company to ensure that we’re for well positioned.


Have the supply chain problems normalised?

From our perspective what we see right now, the supply chain is generally normalised. Lead times are back generally in profile.

There are always spot shortages of certain things and semiconductors continue to be challenging in certain areas. But, in general, the supply chain is in much better shape than it was six or nine months ago.