Michael Dell: Our R&D Spending Will Be Nearly Twice That Of HPE

Dell CEO Michael Dell said the combined Dell-EMC will spend $4.5 billion on research and development, nearly twice the level of rival Hewlett Packard Enterprise.

Responding to past criticism from HPE CEO Meg Whitman that the debt load from the largest acquisition in IT history will result in difficulty funding critical R&D, Dell said: "We'll invest close to $4.5 billion in R&D which is maybe close to two times what that other company you mentioned [HPE] is investing. So any statement to the contrary would just be misinformed."

HPE, which became an independent company last November, spent $1.2 billion in R&D through the first six months of its fiscal year ended April 30.

Dell said the $62 billion acquisition of EMC-VMware, which includes up to $49.5 billion in debt, provides Dell with "enormous flexibility" to invest in the business -- including in R&D -- going forward thanks to historically low debt interest rates.

[Related: Dell Enterprise Boss Haas Promises 'White-Glove' Treatment For EMC Partners]

"If you look at the interest rates on corporate debt, you have to go back to 1956 to find lower rates," said Dell in an exclusive interview with CRN. "What we have been able to do in taking first Dell private and now EMC private is create the largest enterprise systems company in the world with also a structure of investment-grade secured debt, which gives us enormous flexibility to invest in our go-to-market, our channels, our partners, our research and development. I will apologize to no one for the strength of our company. Anybody who calls it otherwise is just not dealing in facts."

Dell said the EMC-VMware acquisition is "very much on track" and will "probably" close sooner than the anticipated October time frame.

Dell's comments come as HPE is in the midst of an aggressive push to recruit EMC and Dell partners who might be concerned that the integration of the two companies will result in confusion in the field with regard to sales coverage, product road maps and even R&D investment priorities.

Whitman has painted HPE's decision to become an independent enterprise-focused organization with the ability to move faster and be more innovative as a sharp contrast to Dell's strategy to build a $75 billion IT behemoth with a product line that runs from client systems to the data center.

Whitman in May moved to spin off HPE's $20 billion enterprise services business in a merger with systems integrator CSC that is expected to close by March, 2017. That tax-free spinoff makes HPE a stronger, $33 billion infrastructure-focused organization, said Whitman.

Just last month at HPE Discover, Whitman said HPE is having success recruiting Dell and EMC partners. "We are bringing EMC partners into the fold. We are bringing Dell partners into the fold. And I think they like what they see," she said. "It seems like the enthusiasm is enormous."

Whitman told CRN in May that HPE has taken advantage of the uncertainty around the acquisition. "A lot of partners are asking – 'How is this exactly going to work?'" she said. "'Is EMC going to get the right amount of R&D? What is coverage model going to look like?'"

Bob Venero, CEO of Holbrook, N.Y.-based solution provider Future Tech, No. 167 on the CRN 2016 Solution Provider 500, said anyone who thinks Dell is not going to double down on R&D when it completes the EMC acquisition is fooling themselves.

"I am sure Dell is going to continue to invest heavily in R&D over the next decade," he said. "Dell is a company of firsts. It is a leader in product, process and ingenuity. I see the breadth and depth and size of the combined Dell-EMC supporting and continuing to drive that innovation going forward."

Venero, in fact, sees a privately held Dell-EMC driving R&D and innovation at a faster pace as a combined company. "What you are going to have is the largest privately held technology company in the world moving not like an aircraft carrier but more like a speed boat in this ever-changing, dynamic world of IT that we are all a part of," he said.

Venero credited Michael Dell with having the entrepreneurial drive and spirit to deliver unprecedented technology breakthroughs in the combined Dell-EMC in the years ahead. "Michael is an entrepreneurial visionary who understands technology at every level, from the chips in PCs to the most technologically advanced data centers in the world," he said.

Michael Dell, for his part, said his company's status as a privately held entity has allowed him to invest more aggressively in R&D and sales coverage. "When you go down the roster of the top channel companies in the United States, when you look across Dell, EMC, VMware, we've got the broadest set of solutions, and we've got great partnerships."

As for the relative importance of scale versus speed in the current IT market, Dell said both are important. "You need agility and speed and you need scale," said Dell. "One of the things I love about our structure is that we have the ability to do both. For example, look at Boomi. Here's a great little business that we're incubating within Dell that's continuing to near-double in size each year. Look at Pivotal or SecureWorks. These are businesses that are growing quite fast and are truly nimble in how they operate."