EMC World: Michael Dell Says Dell-EMC Is Gaining Ground Against Shrinking, Less Innovative HP

Dell Inc. Chairman and CEO Michael Dell on Monday used his EMC World keynote address to attack rival Hewlett Packard, saying his company is stealing market share from an HP that produces less revenue, less innovation and less investment in R&D.

Dell accused Hewlett Packard, which split into HP Inc. and Hewlett Packard Enterprise last November, of slashing R&D spending at the expense of innovation.

"They're getting smaller, they're separating their edge from their core with far less revenue, less innovation, less investment in R&D, less software, a smaller supply chain and losing share in each of their businesses to Dell," said Dell.

[Related: EMC World: Tucci Passes Torch To Dell]

Dell's shot at HP came while his company is in the midst of acquiring storage market leader EMC in a $60 billion deal -- the largest in IT history.

Dell said its clear "who's winning and who's losing" from market share data. He pointed to PC market share data from researcher IDC that shows Dell's client business in the United States grew 4 percent year over year in the first quarter, while HP's declined 14 percent. Dell gained 2.5 points of market share in the quarter, while HP lost 2.4 points of share, according to IDC.

The stats Dell cited put his company on top of the U.S. PC market for the first time in more than six years. That success came despite overall market declines. According to IDC data, the U.S. PC market shrunk 6 percent in the first quarter. The worldwide PC market contracted 11.5 percent in the same period.

"You can't shrink your way to success -- that's not even a real thing. But [HP is] doing it," Dell said.

"We're going in the opposite direction: building scale, while fostering speed, agility and innovation," Dell said. "By combining Dell and EMC, we can become the essential technology infrastructure for the next industrial revolution."

Dell itself spends far less on R&D than either EMC or HP and HPE. In a February Securities and Exchange Commission filing, Dell said it spent $1.27 billion on research, development and engineering for the fiscal year ended Jan. 29, 2016, a 2.4 percent year-over-year increase.

HP Inc. and HPE, which combined total $103 billion in annual sales, spent $3.5 billion on R&D in fiscal year 2015, up from $3.44 billion in the year before.

EMC, which weighs in at $25 billion in annual revenue, spent $3.16 billion on R&D in 2015, up from $2.99 billion in the prior year.

One EMC partner, who attended the keynote and also works closely with HPE, said he felt Dell's remarks were out of line.

"I thought his comments were weak and unnecessary," said the top executive. "HPE is three years ahead of Dell-EMC in terms of the product road map. I have met with both companies. HPE's field teams are very focused and the EMC-Dell field teams don't know what the product road map is going to look like."

The executive said HPE's soon to be released blade chassis are "super innovative" -- taking a leadership position over Dell and Cisco.

"There are enough new product announcements here that he didn't need to do that," the solution provider executive said. "No one's talking about HPE here, and Dell is going to have to coexist with HPE, and with Cisco. They'll all coexist. It's very uncommon for us to see a completely homogenous environment."

HPE, for its part, said in a statement: "The Dell/EMC and HPE strategies are in stark contrast of one another. Dell/EMC are looking to get larger, lever up their balance sheet, and double-down on mostly legacy technology. HPE is more focused, de-levering the balance sheet, and leaning into new technology. We like our strategy and have already seen evidence in our results."

HP Inc. responded with a statement: "HP has one of the strongest product line-ups in our history. The technologies we're bringing to market today are second to none in terms of style, performance and quality. Combine that with the value our channel partners bring to customer engagements and our innovation pipeline, and we're confident that we'll outpace the market and the competition as Dell remains distracted with an acquisition sure to cause market uncertainty. HP is ready to seize that opportunity."

Combined, Dell and EMC will be an $80 billion computer behemoth, with HP Inc. and HPE now weighing in at $52.7 billion and $50.3 billion respectively.

Both HP Inc. and HPE partners have told CRN they see both independent companies moving faster and driving more innovation on their own.

"The split has allowed each of those companies to move faster and deliver more innovative products in their respective markets," said Kelly Ireland, founder and CEO of Orange, Calif.-based CB Technologies, an HP Inc. and HPE partner that is collaborating with both companies on new solutions. "We have never been more excited about our ability to deliver innovation to customers with HP Inc. and HPE hardware, software and services."

In the 2016 fiscal year, ended Jan. 29, Dell reported a $1.1 billion loss on a 6 percent decline in sales, to $55 billion.

As a combined company, HP and HPE ended fiscal year 2015, ended Nov. 1, with GAAP net earnings of $4.55 billion.

After Dell completes the EMC acquisition, the combined family of companies will be known at Dell Technologies, Dell told EMC World attendees. He said Dell's PC business, which it calls "client," will be branded Dell, while its enterprise business will be known as Dell-EMC.

Steven Burke contributed to this story.