 Live from Las Vegas, it's theCUBE, covering Dell Technologies World 2018. Brought to you by Dell EMC and its ecosystem partners. We're back in not so sunny Las Vegas. You're watching theCUBE, the leader in live tech coverage. We're here at day three, wall-to-wall coverage of Dell Technologies World, the inaugural Dell Tech World. I'm here with Tom Sweet as the CFO of the $80 billion Dell Technologies Empire. Thanks for coming to theCUBE. Happy to be here. So, really thrilled to have you on. It's the first time you've been on theCUBE. You guys usually don't let me on. So, you know, they're letting me out a little bit, I guess. Yeah, well, I say we're happy to have you. So, a lot going on, obviously, in your business. I mean, let's start with, you know, we're a couple of years into the integration. You guys, obviously, you dug in, got a pretty good handle on this. I think, like I said, 80 billion. When it started, you guys were low 70s, I believe. You've seen some growth, not a lot of growth in this business, but you guys are growing. So, give us the rundown of your business. How should we think about the Dell Empire, as I called it? Look, I think we're very happy with the progress that we've made since the integration, which was back in September of 16. And so, you know, over the last 20 months, we've been focused on, you know, building velocity within the business. And particularly as you think about our major tranches of product, if you will. So, you know, our client businesses is growing quite nicely as we evidenced by last year, 21 consecutive quarters of share gain. Pleased with our server velocity, you know, last year we reviewed number one in servers. Storage has been a bit of a working process, as you know. But I think we're beginning to see a little bit better velocity in that business. Clearly we have VMware and we have Pivotal. So, you know, what's been really interesting is how the companies have come together, right? And the offerings have come together in a much more integrated fashion, which has been fun to watch and fun to sort of help put this thing together. And the customer buy-in and the customer acceptance of the vision and the story has been, you know, pretty remarkable from my perspective. And the client side of the business was, it surprised me anyway, it's like the gift that keeps on giving. Well, you know, what was it? 10 years ago they said the PC was dead, you know? And, you know, today it's roughly half of our revenue and growing nicely. And, you know, I think the secret as always, as you know, is that work gets done on a keyboard, you know? And the tablet and the phone become an and device, a notebook and a tablet, a notebook and a phone. And, you know, we keep innovating form factors and innovating the interfaces with the device. So, we're pretty excited about it, about the, you know, that it's just a really good, really great business for us. I think what Michael said in his keynote when IBM announced the end of the PC era, since then there's been four, I think he said four billion PC's. Exactly. So, this is astounding. Yeah, no, clearly the markets, you know, the overall market for PCs is flat to slightly down, you know, it's going to be in that range. But, you know, in that type of market, you know, our point of view as you well know is, you have to take share, you have to grow. And the team's done a nice job. Jeff Clark and his product team have done a really nice job around, you know, form factor innovation in the, you know, 87 CES awards this year for a PC. So, really good, really good business for us. And from a CFO's perspective, it's throwing off cash, it's profitable. I mean, you're comfortable with a, what is it, a five to 6% operating margin? Yeah, I mean, we typically think about that, it's about a 5% off being business. But it provides a huge amount of scale for us. If you think about our supply chain, our ability, and so it's a nice predictable, really strong cash flow business for us. So, it's a good business. And the higher end, the server business and the storage business is what now? Around 7% off being, and is a lot of upside there potentially? Yeah, it's a little bit higher than that. But there is upside there as we continue to drive the business and drive efficiency in that business. And, you know, as you know, we're doing a lot of work right now in our storage area in terms of how over time do we evolve that road map around the solution set and working more in an integrated fashion with VMware around, you know, the convergence of hardware and software into more thoughtful and smarter designs or in the storage platform. So, you know, that business is, you know, that's going to be a really interesting business for us over the next year or so. Well, another VMware, people look at Dell as a hardware company, but VMware's not a hardware company, it's software marginal economics. It throws off 50% roughly of your operating cash. I mean, it's a gem. Hey, you know, we're obviously huge fans of VMware and it's a great company growing very nicely. And, you know, an extraordinarily well positioned as you think about the world of multi-cloud, you know, and what we're doing and how they're thinking about, you know, any device to any device, any cloud to any cloud. That whole story is resonating. And, you know, from a CFO perspective, you got to like software margins, you know, it's a good business. So let's talk about the debt a little bit because I think there are a lot of misconceptions, you know, out there. You've paid down $10 billion in debt. I think it's roughly around $40 billion now. Is that about right? That's a little bit higher than that because we've added some debt related to our GFS business. But, you know, I think the way you ought to think about our debt load is that very manageable. We're right on the schedule we thought we were going to be on in terms of debt pay down, you know, and we'll continue to pay down debt. I mean, from a capital allocation focus, you know, 60 to 70% of our capital is focused on debt pay down. Doesn't mean we're not investing in the business properly because I think we are and we're continuing to fuel those investments. And then, you know, we're going to add some debt because our GFS, our financing business, we use debt to fund that business. But, you know, we think that that's a little bit different sort of perspective. You know, we think about that debt separately and different than the core debt of the business. And our analyst community and the credit rating agencies think about that debt differently. So, and the GFS business is growing very nicely, you know, in terms of originations it's a great tool for our sales force to help, you know, in terms of the financing capacity and credit capacity for our customers. So, it's a great, it's a good business. And from a tax, let's talk taxes for a second. I know it's kind of, you know, off the normal Q interviews but a lot of people talk about that. Oh, the legislation, tax legislation, that's bad for Dell, you can't write off that debt but essentially from what I've read it's a net neutral to you guys. Yeah, look, I mean, it's generally, you know, generally neutral to maybe slightly negative as we understand the debt regulatory environment today with the US tax reform. So look, yes, I mean, they did put some limits on how much interest and there's transition rules around how much you can deduct. But you know, you got a lower corporate tax right in the US. You also have the immediate expensing of CAPEX. And so, and then you, you know, you got the repatriation total charge, which will, but when you throw it all together, slightly negative, but it's clearly, it's not a big cash dynamic for us. It's not a driver of, geez, we've got to go do something with our capital structures as a result of that. So, you know, that's just a misconception that's out there right now. And then you told me earlier that the pivotal move was not about de-levering. It was a move that you guys have been planning for a while. I mean, that was in the works when, you know, before the merger, talk about that. Look, I mean, Pivotal's done a, you know, the growth of Pivotal and the acceptance of Pivotal has been remarkable. And so, you know, that conversation around, should we IPO, when should we IPO? It's been in the works for over a year. And look, Pivotal had to, you know, had needed to continue to grow and mature a little bit in some of its processes and making sure that, you know, when you decide to go public, that you're ready to go public. And so over the last year, that's what they've been working on. But in terms of the actual, you know, to go public in the proceeds from that, that's all about giving Pivotal their own capital to fund their business growth and dynamic. We could have done it at the Dell level, a Dell technology level, but I thought it was more appropriate at the size of company they are, that they have their own, their own, you know, capital. You know, they're doing business with over half of the Fortune 500. So, you know, they need some substance. And you know, it's a great retention tool in terms of having currency for, you know, their employee base for both attracting talent and retaining talent. That Silicon Valley company with its own color, I've visited those offices. It's not the normal, you know, corporate office down at Howard Street, right? No, I mean, you know, they're doing the huddles in the morning and, you know, it's a, you know, but that's what's interesting about Dell technology, the family of businesses, the different cultures, the different capabilities. It's a pretty remarkable set of companies. The market's booming right now. You know, hope it continues, you know, knock wood here. But what are the assumptions you're making in your business, maybe the economy, I could touch on that. Yeah, look, I mean, when you look across the top 45 economies right now where we do business, they're all growing, GDP is growing. So we feel pretty good about, you know, the overall economic environment. Interest rates are slightly rising, but not a big issue for us from, even with our debt load, you know, we're about roughly 70% fixed, 30% floating. So the fact that LIBOR is up a little bit isn't a big deal. You know, currency is relatively stable. So look, we're positive. And companies and institutions are spending on IT. You know, the round of innovation that's being driven, the round of investments and the changes in business models, you know, typically one of the first things they go do is they drive they invest in IT to help with that digital transformation, that IT transformation. So, you know, we're bullish on the economics and you know, so it's a good platform for us. One of the things I've said, you know, for quite some time now is that the merger between Dell and EMC was inevitable. You had these pressures of cloud. You needed a company who was comfortable with a lower margin business and had a profitability model that could thrive in that. It just, it made a lot of sense. But you don't have a public cloud and you're comfortable with that, but you've done a lot of work with, I'll call utility pricing. Can you talk about that a little bit? Well look, you know, one of the feedback things that we got from our customers is, hey look, I like the economics of the cloud, right? I like this pay as you consume, pay as you grow, that flexibility to scale up, scale it down. And so through our Dell financial services and using our own balance sheet, we have put together flexible consumption models. So I can offer you a pay as you grow, pay as you consume, or we can do a straight out utility where the assets are on my balance sheet and you're paying a monthly fee, if you will. So all of that, all we're trying to do there is to normalize the economics for our customers. So hey, I want you to take economics out of your decision about whether you want to go to the cloud or not, because we can offer that capacity and capability. And let's really talk why and what's the purpose and what's the workload, what's the problem you're trying to solve. And you obviously recognize that as radical revenue. Oh yeah, absolutely, yes. And so, but I'm guessing it's not meaningful like a software company shifting from a perpetual model to, or is it? I mean, is it? Well I think over time you're going to see the rise in these types of models, I mean customers are interested as a service models, you know, and so there is interest in that and I think you'll see that piece of the business grow over time, but I don't think it's going to be a step function change. And you know, but again it's just another example I think of Dell Technologies offering customers what they want and then different and innovative ways to do business with us. One of the things that EMC did was they did a lot of M&A, that's kind of how EMC innovated. No offense to my friends from EMC, but they fill gaps. And a lot of times those gaps created huge overlaps. You guys are addressing that, carefully I understand that. How has the merger, the debt affected your ability to do M&A, how critical is that to you guys? Because you were very acquisitive obviously as well. Well look, I mean we are very, we're still very active as we look at the technology trends and what type of capabilities and new technologies are on the horizon. So we haven't done a lot of M&A since the acquisition of EMC. We've been principally focused on the integration, but if you look at VMware, they've done acquisition. We've done a couple of really small tuck-ins within the family. But the other thing, but we'll continue to look at that. And one of the other tools in our tool chest as you know is Dell Technologies Capital. I think we've got roughly over 81 investments in technology startups and principally on the West Coast but some overseas and very focused on security, AI, machine learning, next generation storage capabilities. And so we have our, we get exposed to that type of technology and we put our R&D teams together with them. So I feel like we're in a reasonable position and as the business tells me they need something we'll go evaluate it. I want to ask you a question about your peers, the CFOs, I mean you're getting to know you a little bit, I think you're a rock star CFO. One of our analysts called, said the other day Tom Sweet is a stud, I said it's the makeup on theCUBE. But so what's going on and you got a big job and I think you've got a really good handle on what's going on here. What's going on in the world of CFOs these days? I mean obviously you got stuff like GDPR that gets in there but digital transformation is obviously a huge theme among the C-Suite. Security is a board level issue. What kind of discussions are you having with your peers these days? Look, I mean most of the conversations tend to be around two or three different areas. One is how do you think about how does the finance function and our capabilities change over the coming three, five years? How do you think about the use of AI, machine learning and in the processes of the company and what do you do, what is everybody doing to innovate around that? That's a pretty common conversation we're having. Security cyber is a huge conversation point in terms of hey, how is your board looking at it? How are you thinking about it? Since we're CFOs we're always talking about how much money, what's that investment profile you need to have there in terms of what's the right amount, as you well know, you can spend a lot of money there and are you guaranteed of a perfect defense? Absolutely not and so that tends to be a common area but more importantly this whole big data conversation that's also happening around how do you help the business make better decisions? How do you add and drive value back to the business? How are you using advanced analytics to drive insight back into the business, the various businesses? And so pretty much the same sort of conversations we're having with our customers we're having internally or amongst the CFO community. A lot of risk management obviously goes into that equation. I mean inside of tech or outside of tech or there are companies or CFOs that you sort of follow, admire, kind of models that you look at. Look, there's some great CFOs that I've had the opportunity to have interactions with. Mark Hawkins at Salesforce is a great CFO, it's all a good friend. Amy up at Microsoft and they're really doing a really nice job up there and then Bob Swann at Intel. So we tend to sort of be industry organized just because that's how we interact but they're all doing nice jobs and really interesting innovative things within the context of their company's business model. Have you changed the sources of where you guys get information? Obviously your peers is probably number one but as the digital world comes forward have you sort of changed the sources or is it still sort of the Wall Street Journal every day? Well it's guys like you right? We're out watching the blogs and you know, look I mean, look the amount of data and information that's flowing these days pretty can be overwhelming. So I tend to be, I'm looking at industry publications, I'm looking at some of the online blogs in terms of trying to understand where are our competitors headed? Where is the industry headed? What are the themes out there? Michael's got a perspective with his leadership team that hey he wants us out in front of customers. So I spend roughly 30% of my time with customers and partners and you have to be aware of what's obviously what's going around in the industry not only to be thoughtful and intelligent but to also help think about where do you position the company three, five years down the road? And helping Michael in that thought process and helping the leadership team in that thought process. Well Tom it's been a real pleasure getting to know you a little bit and watching you guys in action. Wish you best of luck. Thanks so much for coming on theCUBE. It was fun. Keep it right there buddy we'll be back with our next guest. After this short break you're watching Dell Technologies World Live on theCUBE.