The CFO of Dell explains how a 5-minute call with Michael Dell put him in the position of navigating the company through a $67 billion mega-merger and a public offering

The CFO of Dell explains how a 5-minute call with Michael Dell put him in the position of navigating the company through a $67 billion mega-merger and a public offering

Dell CFO Tom Sweet

  • Tom Sweet, who became Dell CFO in 2014, discussed his long career with the Texas tech giant with Business Insider, including how CEO Michael Dell surprised him with a job offer five years ago.
  • He also talks about the dizzying journey Dell has been on in the last five years ago, when the company went private, bought EMC and its subsidiary VMware for $67 billion and then reemerged as a public company a year ago.
  • Sweet also discussed the challenges of integrating EMC and VMware as part of the Dell organization as it takes on the rise of the hybrid cloud and multicloud trends in the enterprise tech market.
  • "We are the majority owner but on the other hand you try to be respectful of the environment," Sweet told Business Insider. "VMware has been very successful with an ecosystem that has many partners in it. It's not just Dell technologies. It requires balance and thoughtfulness."
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Tom Sweet, Dell's chief financial officer, is not just good with numbers. His recall for dates is also pretty impressive, it turns out.

May, 5, 1997 - his first day at Dell - is "burned in my brain," he told Business Insider, though it was a boring Monday when he sat around doing nothing until a manager told him to just go home.


January 25, 2014 was more eventful. That's when Dell founder and CEO Michael Dell called him out of the blue and said, "I'd like you to be my CFO. Are you interested in doing that?" Sweet said he ended up saying 'Yes' in what he still remembers as a somewhat baffling, super-quick 5-minute phone conversation that left him flustered.

"Have you ever had one of those experiences where you hang up and you go, 'Did that just happen? Did I just imagine that?'" he said.

Today, Sweet is Michael Dell's chief numbers guy - the executive who must streamline the company's finances in the wake of complex transactions that turned Dell into a heftier competitor.


Sweet became CFO at a time when Dell has been going through huge changes. The company had just gone private when he took the job. A year later, it bought EMC and its major subsidiary VMware for $67 billion, the biggest tech merger in history. And then, a year ago, it returned as a public company, through yet more corporate maneuvering.

Not only does it fall on him to help Dell adjust to the financial reality of having EMC and VMware on its balance sheet. And not only does he have to help manage the debt that Dell took on to finance that deal.

He also has to be the one to explain to investors what the new Dell is all about, as it expands beyond its traditional focus on computers and servers, and renews its efforts to become known as a heavyweight in cloud computing, the market dominated by Amazon Web Services.


It's not always easy.

"I'll be at investor meetings where they say, 'Well, you're just a PC company?' Or: 'Aren't you just EMC sort of reconstituted?'" Sweet said. "And I'm like, 'No, You couldn't be farther from how we perceive the company.'"

Not always fun

The questions are understandable. Sweet said: "The last six years we've done nothing but evolve and change. It's been challenging and extraordinarily interesting and fun to be part of."


Well, it's not always been fun.

Taking Dell public again was a tricky process that involved buying back shares tied to Dell's interest in VMware, which allowed the tech company to go public without an initial public offering. But even tougher was the bold move of buying EMC and VMware in 2015.

Doing the deal when Dell was still private had one key advantage for Sweet. "I didn't have to worry about how the market was going to react and 'what's the impact on my stock price,'" he said. But it was still a complex and financially-risky transaction.


Analyst Roger Kay of Endpoint Technologies Associates told Business Insider that the company was "able to leverage the company up like crazy in order to close the deal" although "they landed on both feet and they were able to pay down billions in debt."

Actually, debt remains an issue and paying it down is a key focus for Sweet. Dell's gross debt nearly quadrupled to $52.9 billion after acquiring EMC. As of late August, Dell said it had reduced that debt by $17 billion and is on track to pay down another $5 billion in fiscal 2020.

But the trickiest part of the EMC-VMware deal was integrating the two huge entities into Dell. VMware, a publicly traded company in its own right, led by a veteran and respected CEO, Pat Gelsinger, is particularly challenging.


The challenge of integrating VMware and EMC

"We are the majority owner, but on the other hand you try to be respectful of the environment," he said. "VMware has been very successful with an ecosystem that has many partners in it. It's not just Dell technologies…They have their own open ecosystem, so finding the right balance of how do you stay coordinated, but yet providing enough flexibility within the model for VMware to continue on their own great success. It requires balance and thoughtfulness."

It also requires explaining to customers how the three entities are supposed to work together. Sweet said a key message from customers on the merger has been, "Hey, it would be nice if you guys were more integrated and you could take complexity out of the equation, from applications all the way to how you sell to me. Can you be more coordinated and integrated?"

"We've been working quite hard on that over the last two years, to do a better job of presenting one face to the customer."


Taking aim at new cloud trends

This is important given Dell's grand plan. Buying EMC and VMware, Sweet said, "was a big bet based upon where the trends are headed."

EMC and VMware give Dell more firepower in the public cloud, the trend that lets businesses set up networks on web-based platforms run by the likes of Amazon, Microsoft and Google. This has also allowed businesses to scale down or abandon private data centers, which is bad news for companies like Dell that sell gear and systems to set up those in-house data centers.

Sweet said that when Dell went private in 2013, the prevailing view was, "Hey, public cloud will take over the world."


But Dell is banking on playing a key role in two newer trends: One is the hybrid cloud where businesses set up their networks in the public cloud, while keeping big segments of their data and applications in private data centers. The other is multicloud where businesses set up networks across different cloud platforms and in their own private data centers.

Dell added EMC and VMware to its arsenal to become more competitive in the cloud, and began boosting R&D spending in time to take on these trends.

By the time Dell went public again last year, the cloud was viewed as "an operating model. There's a certain maturity level and understanding of how to use the cloud and what's relevant for that." Part of that understanding is that costs have become more critical for businesses which are now less inclined to spend small fortunes on their private data centers.


This was underscored at last week's Dell Technology Summit in Austin where Dell introduced Dell Technologies On Demand, which would let businesses install the company's data center gear, but pay only for the computing capacity they use, instead of paying sticker price for the hardware.

This new model is based on what customers say they need and want, Sweet said: "Most of the technology teams and CIOs we're dealing with are trying to say, 'Okay, how do I get more efficient, how do I drive down cost, and how do I take that cost and reinvest them."

Sweet one thing he's had to adjust to since Dell went public again is "talking to the public every quarter on your results."


"Yes, I want to do well in a quarter, but I'm also thinking about how do I think about where we are longer term," he said. So part of his job is to explain to investors that "we're in it for a longer term."

A long history with Dell

It helps that Sweet is a Dell old-timer who has has seen the tech giant evolve and even thrive for more than two decades.

"The company has gone through multiple reinventions," he said. "We have gone through various economic cycles."


The toughest time for him, he said, was when Dell had to navigate the recession a decade ago. It was also around that time when Dell was hit with a $100 million Securities and Exchange Commission fine for misreporting payments from chip maker Intel.

"That was probably the low point," he said. "It was a point of a self reflection of where am I in my career and where I need to be...I was beginning to think, 'Geez, if I ever wanted to be a public company CFO, do I need to go do something else?'"

But Sweet stayed. It would be years later when he would get the call asking him to be CFO of a tech behemoth facing perhaps the biggest challenge in its history. There's definitely more work to do, Sweet said.


"It's never fast enough and it's never enough," he said. "But in terms of where we started from three years ago to where we are today I think it's been reasonable progress."

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