 From around the globe, it's theCUBE with digital coverage of Dell Technologies World. Digital experience brought to you by Dell Technologies. Hello everyone and welcome back to theCUBE's continuing coverage of Dell Tech World 2020. This is Dave Vellante. With me is Tom Sweet. He's the EVP and Chief Financial Officer of Dell Technologies. Tom, it's great to see you. Thanks for coming on the VirtualCube. Dave, it's always good to see you and thanks for having me. It's always good to have a conversation with you. I actually don't think, I mean, I've spent a lot of time talking to folks from Dell, but I don't think you and I have talked since the pandemic hit. So, you know, what's the macro picture? You know, you and I usually start with the big picture and of course the impact of the pandemic and kind of the big waves that you're seeing out there and maybe some of the changes that you're navigating. Well, you know, it's been an interesting year, Dave, as you and I both know, right? And so we, you know, we clearly did a number of tactical actions as we worked our way through the pandemic in the early days to make sure our team members could work and we're safe. And then pivoted to making sure we could, you know, help our customers and get them up and productive from a work-from-home perspective. You know, and so it's, and then we've evolved into then, you know, how do you think your way through, you know, what's the work, how do you work your way through? What do you look like on the other end? And so we've been spending a lot of time thinking about investments. Where do we put capital to work to position the organization for success post COVID, whenever that might be, by the way. And so that's been the focus in, you know, really spending a lot of time on investment areas. The whole macro dynamic has been interesting as you know, you know, we went through this huge trough in Q2 in terms of GDP and global GDP. You know, we're working our way out of that at a macro level. It's very interesting as you go across the globe and look at the various countries and regions and how they're recovering at very different paces. You know, the business has been an interesting business in terms of what we do. And our PC business has been quite strong and we've seen a big shift with the work-from-home and the learn-from-home dynamics with strong demand from government and education. The infrastructure business, our ISG business has been a bit softer just as companies have pivoted. But all in all, I think we're working our way through it. I think the actions we took to preserve liquidity and protect the P&L early in the pandemic have paid off for us. And we're now focused on how do we position post, you know, when we get through this whole COVID dynamic? You know, we've both seen a couple of pretty severe downturns. I think about the dot-com downturn and then the financial crisis. I'm actually kind of surprised and impressed that not just our industry, but all industries have worked through this. I guess in hindsight, it shouldn't be surprising given the pace of technology. But I remember those two that I just mentioned, people were flat-footed. I remember Ed Xander joking when he was at SON. Anybody want to buy a server? And it was just, business wasn't being transacted. And that's different this time around. Industries have responded. And technology, of course, is at the heart of that. But were you surprised at all by the pace of, I don't want to say recovery, but resiliency, I guess. A little bit, to be honest, Dave. I mean, it does highlight the fact that at the heart of what most companies are doing these days is technology and how they evolve their business model, how they interact with their customers. And so clearly, if you think all the way back with our industry day, back to the early 2000s, and we had a, with a bump with the dot-com bust and people shut down IT spending, you know? And now I don't think you can really do that if you think about where you need to be from a business model perspective. So I think there's been a maturation and a recognition that technology plays a key role. But it has been surprising about how fast it's pivoted, to be honest with you, in the sense of, think of the very distinct cycles as we've come through the COVID dynamic. Big PC demand early innings. We saw some recovery in the ISG spend in Q2 in our quarter, second quarter. A little bit better than Q1, you know, as companies readjusted spend. And so it's the organizations across in our customer base have adjusted quite well. Clearly there's vertical implications. If you're in the airline industry or some of the hospitality, you're being a bit more cautious, right? But all in all, it's been a, it's been an interesting journey for all of us. Yeah, I mean, at the height of the pandemic you saw, you know, some people taking actions. Obviously they were freezing IT projects. They were starting to do layoffs or freezing new hires. That's moderated based on the data that we've seen. I just published the other day that we're starting to see some, you know, slow thawing of that tight grip on IT. What are you seeing, both externally and maybe as the CFO, what are you doing internally? Well, if you talk to my CIOs, she probably gives you a different answer, David. And what I'm about to give you is, you know, I'm an extraordinarily balanced guy in my point of view, right? But, you know, look, I think externally we're seeing targeted investments happening by customers that are moving projects forward. I think there's a bit of caution. And I do think this whole evolution of how do customers want to consume IT as evolving? You know, is it a cap X spend? Is it a, is it a financing structure? Is it a, as a service and consumption model type? You know, so those, the economic models around IT are changing and evolving. But I think overall what we've seen is some level of, you know, cautious, you know, cautiousness, but yet, you know, targeted investment with our customers. And internally, quite frankly, we're continuing to invest. We have capabilities that we need to evolve. You know, we're working, we're very focused on transformational projects that enable our customers to do business with us easier. On the other hand, we're being very tight around, what do I need to do from, you know, some of those old run the business type spend and how do I streamline that while still supporting the business properly? So it's a bit of a balance right now. Yeah, and you obviously have the advantage of a large portfolio, parts of your portfolio are exposed, like you said, some of the on-prem stuff, but then you've got the, certainly the laptop and the work from home shift. A couple of questions there. One is, first of all, you know, Dell was largely a larger work from home culture than the average, the average, let's say the average I don't know, 15 to 20% of employees work from home. You're probably higher than that. And, but now we're seeing that people are expecting at least double that long-term are gonna work from home. So you were, you know, somewhat maybe more prepared than most, but then again, you have that tailwind on one side of your business, your supply chain did very well, unlike, you know, some of your competitors that we saw early in the pandemic. You know, so it seems like you've managed that pretty well, maybe your thoughts. Yeah, look, I, we do have a culture that provided flexibility. We've been on this journey for roughly 10 years about having our people have some flexibility in where they work. And so we had roughly 20, 25,000 people working remotely or in some hybrid fashion before the pandemic. You know, obviously right now, you know, 90% of our workforce is remote. We think, you know, post pandemic, it's gonna look like something like, you know, 45, 50% of the organization is probably gonna be in some sort of hybrid or remote setting. And, you know, and that's the feedback our team members are giving us. And, and so, you know, we have been fortunate to be able to have the culture that pivoted quite frankly, quite quickly, I should say, as we worked our way through this from a supply chain perspective. Look, our supply chain has done, the team has done a terrific job on sort of navigating the barriers and the challenges put up by a COVID-19 crisis. But, you know, I'll go farther back today. If you and I talked about this before, think about what's happened with our supply chain and global supply chains over the last couple of years and whether it's the US-China dynamic and how do you work your way through that, you know, and how do you ensure continuity of supply for our customers. And so that team's done a great job. You know, we have long-term relationships with many of our key suppliers, which has been helpful. And, you know, as you know, we have one of the largest, if not the largest technology buy in the industry. So it has helped us in terms of making sure we have capability and availability for our customers. Let's talk a little bit about some of the strategy and the value levers that you guys talk about. You've always hit on industry consolidation, you know, integration, de-levering. We've seen the 13D with the moves you're going to make with VMware. How have things changed there? Has the pandemic changed your thinking at all and how are you doing in terms of those, turning those knobs? You know, first it has not changed our thinking in the sense of some of those key, you know, long-term value creation activities we've been focused on and platforms we've been focused on around, hey, you know, we know that in the, where we sell, where we compete, that the industry is not a, you know, a rapidly growing industry. And so you grow organically by consolidation and share gain. And that's what we've been focused on. You couple that with the innovation engine we have with Dell technologies and including our, you know, with, we need to include in that VMware. We've got, you know, an extraordinary patent portfolio and we've got these, what we think are unique solutions and capabilities. So we're pushing hard on the innovation engine. And then you couple that with the capital work we've been doing around how do you, you know, delivering the balance sheet, getting the company repositioned back towards investment grade. And we've made really good progress on that. You know, we'll pay down $5.5 billion of debt this year which will again position us closer to those investment grade like metrics. And so those platforms are, you know, pillars, if you will, of our strategy haven't changed. But in addition to that, you know, we are looking at where do you grow and how do you continue to grow at a pace perhaps at GDP, GDP plus, which is sort of where we think, you know, is the long-term framework we've got to be thinking about. So that's where you get into these adjacencies like how do you, how do you further drive in the multi-cloud hybrid cloud? How do you think about the opportunity with Telco with the 5G rollout that's happening across the globe and the investment that's going to go into that? The whole edge computing, the edge cloud is of interest to us. And so there's a number of these emerging areas that we think are pretty interesting and they're adjacent and fit nicely into what we do as a, you know, as quite frankly, that essential infrastructure company. So that's the focus we've been driving about how do we set up both continue on our core mission of consolidation, innovation and delivering as well as how do you set up some of these growth vectors as we move forward? Well, and one of the other leavers is you have, you filed a 13D, I don't know what you can share with us. Some of it gets confused how much is fact sometimes and how much is, you know, speculation. But I mean, I've said that it appears that one of the things that you're looking at is creating an equilibrium in terms of the balance sheets of both companies, keep it getting in both that investment grade. What can you tell us about what you're thinking there? Yeah, look, you know, obviously we did file a 13D in mid July which essentially said we were contemplating whether, you know, a potential spin of our 81% ownership interest out to the Dell technology shareholders. And so we're continuing to work with the VMware team on, you know, what does that look like with a couple of the fundamental principles which is, hey, you know, we have both benefited from this better together story. And so how do we keep that differentiation in some type of a long-term operating agreement or operating framework? But at the same point in time, you know, do the potentially look at a spin that unlocks value for both sets of shareholders of both companies, right? VMware gets additional flexibility from a strategic perspective. They don't have the Dell technology's balance sheet sitting on top of them. From a Dell technology's perspective, you know, we presumably as part of this would be some type of a dividend stream, but by VMware out to its shareholders we get the opportunity to accelerate our delevering story and get back closer to investment grade or right at investment grade depending upon how this all works out. So we think there's a number of really interesting value levers here, right? At the same point in time, wanting to protect what's been really good about the relationship and the way we've gone to market, the way we've innovated. And so that's the balance we're walking right now. And, you know, there's work to do as we work with VMware to see if this makes sense, can we get it done? But we're early innings and we may end up not doing anything, honestly. But I mean, that's sort of the thinking that we're working through right now. Well, it's an interesting thought exercise if nothing else. I mean, I look at it, when you combine Dell and EMC when you did the acquisition, now you became VMware's most important partner just even if it's in terms of revenue because you got a massive distribution channel. So there's that inherent value in that relationship independent of anything else. The flip side of that is VMware has been an awesome acquire of companies, inorganic, R&D if you will and some pretty cool R&D as well. So it's going to be really interesting to watch how that plays out. I think we, you know, we'll wait and see to comment. You know, we're working through it and we'll see where we end up. But, you know, you've highlighted a couple of great points. I mean, our go to market reach, you know, is extraordinary and VMware has benefited from that. We've benefited from the VMware relationship with some of their technologies we've integrated those into our combined solution. So it's been a win-win and that's the balance of how do you keep that as well as, you know, quite frankly provide some value back to your shareholders. Well, we've seen that, you know, not just the uplift of the market but clearly the speculation has caused some, you know, unlocking of value and may bring some others from the sidelines. But I wanted to ask you about, I mean, I've been talking about this automation mandate. I think there was one, certainly there was one before the pandemic and now it's even accentuated. Can you talk a little bit about how you're applying automation to your business and maybe what you're seeing with customers? How that could affect, you know, the long-term productivity of your business? Maybe new ways to work? What can you tell us there? Yeah, look, I mean, we have a pretty significant automation agenda within Dell Technologies, both from an internal perspective, as well as the automation and AI and machine learning capabilities that we're embedding into our solutions to help our customers drive their automation agendas. Internally, what we've been focused on is how do I simplify? How do I take complexity out? You know, how do I providing a richer, more interactive experience with our customers? How do I lean into service needs, service capabilities? All those areas that are ripe for automation and in my finance organization alone, I think I have over 125 automation projects going right now as we look at how we simplify. From a customer perspective, as I go out and talk to customers, they're also doing much the same thing that we're doing, which is how do they take complexity out of their process? How do they streamline? How do they drive responsiveness and customer experience at a much higher level? And so it's all walking down this pathway of process simplification, automation, which includes technology investment, obviously, which is helpful from our perspective. And so there's a agenda out there as we talk with customers in terms of and a commonality as we talk with customers. And then the other point I'd give you, Dave, is that just as you think about, as I talk to my peers out in the industry, I mean, many of us are driving automation agendas have a lot of that with focused on taking touch out, enrichment of job and capabilities or enrichment of, we got to build skill sets to drive that. So there's a big theme across the industry in this area. And I think it's going to do nothing but accelerate quite frankly, as we work our way forward. Yeah, I've talked to a bunch of customers in this topic and it seems to be sort of three paths actually. One path is there's a lot of low-hanging fruit and easy wins and, but the problem with that is a lot of times it's just paving the cow path with automation. The other is you got to do the hard work of really digging into the process. And the third that I've seen, which is kind of interesting to, which is kind of what you're looting to is you free up some of the mundane tasks and you let the people who really understand the process rethink that process and then you go into a deeper automation agenda. And that seems to, that'll turn millions into billions. That's the value I add there, Dave. I mean, it's that third kind of framework that you laid out, which is you have to do the work around process. But then again, how do I then, over time as I have the experts help us on the automation capabilities, once we've identified what are the appropriate processes or functions to be automated, how do you then pivot resource to more higher value add activity across the organization? And that's, you know, when you do that, you unlock I think a terrific value creation opportunity, which we're very focused on right now. Yeah, and I know there's always a big concern about jobs with automation, but the reality is, is if you look at the data from the US and Europe over the last couple of decades, the productivity trend is clear. It's gone down. And if you think about the big problems that we face in the world, whether it's climate change or national debt or healthcare or, you know, hunger, you just can't throw people at that problem. You got to have a combinations of people and machines. And so while there may be, you know, a short-term impact, I'm kind of an optimist. I know you are as well. No, it's, you know, obviously this is a tough time for a lot of businesses and customers as we work our way through the pandemic. And including, you know, and some have adjusted their workforce, you know, and part of it's from the economic reality, but part of it is also a skill set dynamic as a reshaping workforce. And, but I do think automation plays a key role in how do you enable skill sets to evolve and get, again, reallocated to other value creation activity. So there is, you know, unfortunately, there are probably going to be some short-term disruptions in certain areas. But on the other hand, if you think about the long-term gain and the productivity gains that we all need to drive, you know, you can't do it without automation and thinking your way through streamlining and taking complexity out of the organization. So my last question has come back to the productivity we're talking about work from home. Do you feel like you've had a bump in productivity as a result? Yeah, maybe there was some short-term disruption, but, you know, what's your data or your gut say in terms of the impact on your organization and then maybe on your customers as well, in terms of the productivity? You know, I think it's been fairly similar between us and our customers. I was concerned when we went to a work from home back in March that we were going to lose productivity. And, you know, and I thought it was going to be a productivity drain, you know, as our team members were juggling work and their family dynamics and situation is obviously in the middle that are in the early anings of this COVID crisis. What we have seen in fact is actually we've seen productivity improve pre-COVID to where we are today. And I think a lot of that has to do with the fact that we're giving our team members one flexibility on how they do their job, but we're giving them time back there and they're not commuting. There's less meetings that are consuming time, you know, and the responsiveness and the capabilities of the order such that we're moving through decisions and projects, I think at a faster pace, quite frankly. And so it's been an interesting, and I think to me, a bit of a surprising result from what we've seen. As I talk to customers and I'm the executive sponsor and a number of extraordinary, you know, very large multinational customers, it's pretty much the same response, you know, the similar experience, right? That they've seen similar results that we have. So now what you don't want this to be is that you're doing that on the backs of the team members working 15 or 16 hours a day, you've got to find the right balance. But the fact that we're giving them flexibility to jump out during the middle of the day to attend to some family members or help with their children's learning. And then they're back in maybe a little bit later during the day. I mean, I do think that we've enabled a culture that's pretty interesting that is paying dividends for us right now. Yeah, it's ironic that this hit at the beginning of 2020 is it's clear that it's going to be a different decade than it was last decade, which I guess every decade is Tom. Tom Sweet, it was great to have you on theCUBE. Thanks so much. Always a pleasure speaking with you. Always great to see you. Thanks for having me. You're welcome. And thank you for watching everybody. This is Dave Vellante. You're watching our coverage, theCUBE's coverage of Dell Tech World 2020. We're right back, right after this short break.