Hello and good afternoon. Welcome to our View from the Top CEO Call series, where we're focused on the vision and strategy CEOs are driving their organizations toward. Before I get started, I need to mention the conflict disclosures as related to the individual companies or securities discussed on the call today can be found on the call invitation. I also do have to read a safe harbor statement on behalf of Dell Technologies. Dell Technologies statements that relate to future results and events are forward-looking statements based on the company's current expectations. Actual results and events could differ materially due to a number of risks and uncertainties, including those discussed in the company's SEC filings. The company assumes no obligation to update its forward-looking statements. With that, I'm so excited to welcome Michael Dell back to our View from the Top series.
This is the third time Michael has been kind enough to share his time with us, and we really greatly appreciate it. It's so hard to do justice on an introduction to Michael, who founded Dell back with $1,000 in 1984 at the age of 19, and we just saw Dell report a $100 billion-plus revenue year last year, $50 billion enterprise value. It's just tremendous for an entrepreneur to start where Michael started and take the company to where it is today. His vision of how technology should be designed, manufactured, and sold has really transformed the IT landscape. In 1992, Michael became the youngest CEO to earn a ranking on the Fortune 500. He took Dell Technologies private back in 2013.
He architected the largest tech deal in history with the combination of Dell and VMware back in 2016. The subsequent relisting of Dell Technologies on public markets back in 2018. Then orchestrated the spin-off of VMware. Just so much of value creation over this extended period of time, it's really hard to wrap our heads around that. Aside from that, in 1988, Michael formed MSD Capital, a private investment firm that exclusively manages the capital for the Dell family. In 1999, he and his wife, Susan Dell, established the Michael & Susan Dell Foundation to accelerate opportunity for children growing up in urban poverty in U.S., India, and South Africa. Michael, I just, you know, I could just keep going this entire time. You're on so many boards and have done so many philanthropic things.
It's, it's just amazing. I will mention he's also the author of two books, Direct from Dell and Play Nice But Win, about which we touched a little bit on last year in January when Michael was with us over here. Welcome, Michael. We really appreciate you taking the time to be with all of us here today.
Thank you, Wamsi. Great to be with you and looking forward to the discussion.
Thank you so much. You, you've just had such a breadth of experience navigating so many different, you know, spending environments, economic cycles, and I'm curious to get your perspective on how you're thinking about IT spending in 2023 and how companies and your customers are talking about their spending priorities.
You know, as we said on our Q4 call, we expect the early part of FY 2024, you know, calendar 2023 is gonna remain pretty challenging. We do expect a return to sequential growth over the course of the year. You know, we've seen in past cycles in 2000 and 2008, you get about a four to six quarter, you know, decline in demand, and we're pretty deep into that now. You know, it started in consumer last year in Q1, in commercial in Q2, servers in late Q2, storage is a little different.
We have seen a little bit of signs of softening in Q4, but it is more resilient given its sort of richer, you know, software content and services content and of course, the ongoing, you know, tremendous growth in data. What we hear from customers contextually is, yeah, there's some macro caution out there, you know, we all know that, but everyone wants to be more digital. I think one thing that's different this time from the, you know, sort of prior 2000, 2008 is the generation of leaders leading companies now understand the importance of digital technology in a much more fundamental way to drive growth and productivity.
The other thing that we're hearing from customers is that the device that is right in front of the user is the one that the user most associates with the company's commitment to being a forward-thinking company, right? End user experience and giving the user the right tools is incredibly important. That also supports ASPs and, you know, super important for us because we're, you know, certainly over-indexed to the commercial side of the PC equation.
Yeah, absolutely. No, that's a great framework and appreciate the comparison to past cycles. One of the things that people have looked at over the last decade now is cloud computing and really trying to understand where IT infrastructure is going as it pertains to both public cloud as well as, you know, the impact to what historically have been on-prem players. So how do you think about the impact of public cloud to Dell's business model and its value proposition?
What we're hearing and seeing from customers is they're moving from kind of cloud to multi-cloud. You know, one of the things they figured out is that lift and shift hasn't really worked out very well. It hasn't been an economic proposition. If you talk to, you know, 1,000 CIOs 3 years ago, they would have thought lift and shift was a good idea. Now, if you ask them, they'll tell you that, "Not really such a good idea." Big change there. Over 90% of the customers already have on-prem, colo, and public clouds. Customers are really starting to understand that there's a right place for any given workload. A new problem that customers face is: how do you make all these different environments look like one system?
They're starting to adopt, you know, FinOps to really understand which workloads belong where. You know, we've been having some great success with our software-defined, developer-friendly PowerFlex, you know, infrastructure and storage solution. Many of our largest customers are adopting that. That's part of what we call Project Alpine, which we have talked about in the past, extending our storage software so that it works in all the public clouds, on-premise, colo, and in the edge. Of course, now we have PowerFlex in AWS. You'll see more announcements at Dell Tech World coming up here very soon. You know, that's our sort of premier software-defined storage asset. We've got, you know, write once, run anywhere partnerships with the hyperscalers around many different platforms. For example, with Google, we have PowerScale on GCP and of course, PowerScale on-prem and colo.
We have Google Anthos running with PowerFlex. We have our long partnership with VMware, which continues around VMware Cloud Foundation. With Microsoft, we're working very closely with Azure Stack HCI, which allows those workloads to run anywhere the customer wants. With Amazon EKS Anywhere, that platform is running on top of our storage as well. We've got our Dell Validated Platform for Red Hat OpenShift. Whatever platform the customer adopts, we've got a multi-cloud solution for that. Data protection is also a big use case for cloud, and we have over 1,700 customers that are protecting over 17 exabytes of data in the cloud. We have PowerProtect and our cyber recovery solution in all three of the, you know, major public clouds. We also continue to extend, you know, partnerships with folks like Snowflake and Starburst.
Then we talked about Project Frontier in the past. We'll be making some big progress announcements at Dell Tech World here coming up. This is all about the edge and how to orchestrate applications across the core and the edge and the cloud. You know, that's another big part of what we're doing. One other thing I would point out is, you know, we also serve a lot of the software-as-a-service and hosting and consumer web tech companies providing infrastructure to over 75% of them. This is about 20% of our ISG business. What these customers tell us is that public cloud is about twice as expensive as what we provide them. You know, it's really a workload by workload discussion.
Customers are rethinking what really makes sense with respect to cloud. Certainly multi-cloud is the momentum area that we see.
No, that's super helpful context. Michael, Dell's been so dominant in hardware, right? With, with PCs, with servers, storage, and networking. After the VMware spin, do you feel that Dell needs to rebuild more infrastructure software capabilities, either organically or through M&A?
You know, we're quite focused on organic investment in software. You know, Dell is already number one in storage software, and all of our storage platforms have incredibly strong software content. You know, more than 85% of the engineers in our ISG group are software engineers. You know, we have incredible software assets like our data protection and PowerFlex, which I mentioned earlier. That's our kind of premier software-defined infrastructure and storage solution. Yeah, software is a big part of what we do. In terms of acquisitions, look, I think you'll see us do perhaps, you know, small targeted tuck-ins where there's IP that could be accretive to kind of accelerate the things we're doing around multi-cloud and telco and edge, and some other areas.
I wouldn't hold your breath for any big software acquisitions.
Okay. Fair enough. You've obviously taken, you know, Dell private before. It was, you know, a fairly challenging process, but at the end of the day, you got it done and you know, you did a lot of strategic things for several years, and then you brought it back to the market. With Dell stock trading at seven times calendar 2023 and six times calendar 2024 PE and, you know, less than 10 times EV to free cash flow on calendar 2024, we get this question a lot. What would it take for you to consider to take Dell private again?
Well, no plans to do that, really, Wamsi, not gonna do that. You know, we're public. We're gonna stay public. You know, the real answer to your question is we're gonna buy back more stock and, you know, use our capital to, you know, we're gonna return our capital to shareholders in the form of dividends and repurchase. I think you've seen us take a number of steps along the way to deliver great returns to shareholders and continually be more shareholder-friendly. You know, if you look back, this is over a decade ago now, you know, the circumstances then were entirely different and simply just do not exist today. You know, you had this fear that, you know, the smartphone was gonna replace the PC. We were number six in storage.
We were number two in servers, I owned a lot less of the equity of the company, you know, debt was cheap and abundant. None of those things are true anymore, right? You know, over the last decade, we've made a number of key strategic decisions, including the EMC combination, the VMware spin. All that's created a lot of value. Look, we've transformed the company. We're number one in all of our primary markets, it's a different company than it was then. No, we're not going private.
Okay. That's clear enough and fair enough. I think the conditions around both what the market is and where your exposures are just tremendously different, and you just have such a dominant position in your markets today with some of those fears of PCs going away, have actually turned on their head now, you know, after COVID. I guess another topical thing, Michael, is just AI and, you know, it's been the rage of a lot of recent conversations, including large language models like ChatGPT driving the need for beefier servers and storage. Do you expect a material change in the trajectory for industry server growth? How do you think Dell participates in this? Do you think it's going to become big on-prem or largely gonna stay with hyperscalers?
You forgot about the edge. I think there's gonna be a lot of AI at the edge also.
Mm-hmm. Sure.
You know, if you have a lot of data and you're not using AI, you're doing it wrong, right? You know, there's so much data, the only way to interpret the data is AI. For some time, the AI workloads have been the fastest-growing workloads that we've seen. You know, as a leader in infrastructure, we're clearly, you know, positioned to benefit from that growth in machine intelligence. Look, we continue to innovate there. We recently introduced our XE PowerEdge servers as part of our 16th-generation launch that supports 8 NVIDIA H100 Tensor Core GPUs or also the A100s. Those are the kind of machines you need to run these large language models. As I think about those, it's a massive unlock of the power of data, and it requires enormous computing power.
While, you know, we've all sort of seen the, you know, demonstrations of chatbots and things like that's all fantastic. There are open source models that customers are already beginning to use that allow them to use their private data and drive efficiency and productivity within the narrow bounds of what they're trying to accomplish. Let's say I'm at Bank of America. I don't necessarily need it to write poems, right? Or tell me who the president was 100 years ago. If it can make, you know, people at Bank of America more productive, well, you know, Brian and the team are gonna be super interested in that, right? They are, right?
Absolutely.
Customers are going to need dedicated infrastructure that allows them to do that in a secure way, and they certainly don't wanna hand over their proprietary, confidential, secret data that they're bound to, you know, protect, you know, to some public model. I think, you know, that's all positive. Certainly, you know, servers, you know, there has been a trend toward more memory, more virtual machines, more GPUs, inside these servers, and that's because of the, you know, rapid growth in AI workloads. We even believe that, you know, most of the growth in the future will come from machine intelligence workloads. That's why we, you know, announced a whole series of things with NVIDIA because, you know, that's gonna be kind of the primary application going forward.
Yeah. That makes a lot of sense. Maybe I do wanna come back to servers and PCs in a little bit, but I wanna talk about the capital allocation model because this has been a change in the story. You know, you're targeting returning 40%-60% of free cash flow to shareholders. What drives your decision, whether it's at the low end of that range or higher end of that range? Why is that the range?
Good question. Look, you know, Dell is a cash flow generating machine. I mean, you look over any period in time, there's just a lot of cash flow, and we've been super efficient at that. We delivered, you know, $18.5 billion in adjusted free cash flow over the last 4 years, and we've got a strong record of shareholder returns, you know, particularly since we instituted our balanced capital return policy after, you know, the, you know, the September 2021 meeting and the, you know, subsequent spin of VMware and the pay down of debt and all the things that happened around that time. You know, since that time, returned $4.5 billion to shareholders, and we reaffirmed our commitment to shareholders with a 12% increase in our dividend in FY 2024.
You could see some, you know, tuck in M&A if we find good things. You know, that and continuing to, you know, deal with debt are really not gonna absorb much capital. We are gonna return excess cash to our shareholders, and it's gonna come in the form of share repurchase and dividends. You know, that means it's likely to go higher than 60%. All that is supported by strong, you know, cash flow generation. 40% to 60% is our stated model, but I'm here to tell you that we're gonna return excess cash to shareholders. You know, it's not clear to me that we have other good ways to spend it.
Yeah. That, that seems awfully prudent given where valuation of Dell stock is, particularly at this point in the cycle, where, you know, PCs have had a couple of tough years and frankly, the macro backdrop is uncertain. At the same time, we do know that, you know, we're in a cyclical down cycle where it's gonna come to an end, and these valuations will be rate higher. Absolutely, recommend that, you know, just returning more capital to shareholders is definitely seems like the right approach.
Through it all, we'll generate a lot of cash flow.
Right. Absolutely. You just mentioned that you raised your dividend, right? This is in the midst of a very tough macro backdrop. You know, again, shows your confidence in the cash generation ability of the company. How should we think about, you know, the dividend? Is it a certain yield target, or is it dividend growth consistent with operating earnings or cash flow? Like, how do you think about it?
You know, we think about it more in terms of the annual dollars. We did raise it, you know, to a $1.48 per share. Yeah, it's a reflection of our conviction in the cash flow generation and our commitment to shareholders. You know, we would expect to continue to grow our dividend at a minimum consistent with the long-term, you know, value creation framework that we've laid out of EPS CAGR of 6% or more. If you look at the dividend, you know, it's about $1.1 billion, and we think about it more in terms of the dollars. Yeah, it's a yield of, I think 3.8%, something like that.
Yeah. Yeah.
Attracted.
Okay. That makes a ton of sense. On, on the share buyback point, you mentioned that this is kind of an opportunistic time where you would probably pivot higher than the 60%. Last year, you repurchased $2.8 billion in shares. Typically you say you know, you balance that between programmatic and opportunistic. How much of FY 2022 would you say was programmatic versus opportunistic so we know, like, what's a baseline of what we can nominally expect and then what you would consider as opportunistic?
Well, you know, I suspect the programmatic part is offsetting options and things like that. The opportunistic part is we're just intrinsic value buyers of the stock. You know, if the stock is lower, we're gonna buy more, and if it's higher, we're gonna buy less. Look, I mean, we repurchased 74 million shares since you know, the Q4 of 2022. That's $3.5 billion. Some of that was kind of one-time catch-up related with the VMware spin. You could expect us to continue to be buying back our stock.
Okay. That makes sense. You know, I know some of your competitors have committed to returning maybe 100% of free cash flow to shareholders. Is that something that's on the table as you think about, you know, the framework around just capital return? I know you're already kind of pivoting towards a higher number than the 40-60 right now, but why isn't it 100%?
You sound like you're asking the questions I've been asking. Look, you know, we have a meeting coming up in the fall. I think we'll have more to say about that. Suffice to say, you know, we're gonna return this capital to our shareholders.
Understood. Okay. No, thank you for that. On the, you touched a little bit around the, you know, tuck-in acquisition that you might do or tuck-in acquisitions that might come by that you might do, but not really something that's very large. But right now we're also going through sort of an economic down cycle where a lot of companies' EBITDAs are facing a lot of cyclical pressure. How do you think about your leverage ratio, and is the aspiration still 1.5 times core leverage? And if you think about the excess cash, like, you know, do you think that over time, if you're not going to spend a lot on M&A, that 1.5x core leverage is the right level?
No change to the 1.5 core leverage target. Look, we do see some additional debt pay down as we work toward that target. We're committed to remaining investment grade with all three agencies. We did issue some notes last quarter that was pretty opportunistic given the market. We intend to use part of those proceeds to pay down a maturity that we have coming in June. Look, we're committed to investment grade. Haven't changed the 1.5 core leverage target. That's a very comfortable place for us.
Got it. Okay. Well, a question just on M&A. There has been a lot more regulatory scrutiny around M&A, and this question does come up a lot around VMware in particular. To the degree you can comment on it, would love any perspective on, you know, what are your thoughts on what could happen if, you know, you don't get the deal between Avago and VMware approved, and what is kind of plan B in that scenario?
Well, I suppose you're asking me as chairman of VMware not chairman and CEO of Dell, since VMware is no longer part of Dell.
Yeah.
Look, I'll defer to Hock Tan at Broadcom and Raghu at VMware to comment on that. You know, everything is proceeding notwithstanding the, you know, regulatory review, which is sort of normal for a process like this.
Got it. Okay. Well, coming back to Dell, I guess. You know, when you think about the, maybe just let's pivot a little bit to the product areas and let's talk about PCs, right? Is it too early to call a bottom for PCs in the first half of 2023? I was just out in Asia and, you know, a lot of the Taiwanese supply chain is getting a little bit more excited about the bottoming in PCs. We've just saw Micron report results talking about a lot of inventory depletion that's happening. So curious to get your thoughts around, you know, where we are in sort of the cyclical phase of PCs.
I mean, you know, I think we're seeing some signs that are encouraging in some of our customers, but, you know, this is also tied to the macro environment. We have very good listening posts. Our view is that, you know, the market this year for PCs is probably something around 260 million units. Look, there is a large installed base. It has to be refreshed, and the refresh is coming. You know, we're now five or six quarters into, you know, the declines. Also, the installed base has shifted materially over to notebooks, which has a faster, you know, refresh cycle.
you know, we, we also expanded our TAM by, you know, expanding into peripherals and accessories, which is a nice category for us. Look, we've shipped 160 million units over the last three years. The refresh cycle is coming, and we're well positioned to take advantage of that. Having said that, we've gained share when the market's up, we've gained share when the market's down, you know, very consistently over 10 years.
Yeah. No, you guys have done an amazing job with share and also with attach and, just driving the dollars in the PC business. Michael, how should we think about, you know, channel inventories? How's that trending for the industry and for Dell in PCs?
On inventory, you know, we did a nice job driving inventory down in our Q4. I think there's still inventory to be worked through, you know, on kind of the overall system. You know, we have been able to, I think, have a, you know, maybe a $1.5 billion reduction in inventory from Q3 to Q4, which was pretty good. And we manage inventories pretty tightly. I do think there's some elevated inventory levels that are out there, particularly in retail. You know, our business is 80% commercial, so probably less affected by that. And look, I think our inventory position is differentiated.
In terms of channel inventory, you know, we carefully monitor the sell out and the sell in, and it's in line with our target range. I think I misspoke there. Q4 inventory was down $1.4 billion, not $1.5 billion. We're in a good position. We've got about 90% of our products now are at standard lead times. You know, managing our execution through a time like this is really important. We're gonna stay disciplined in our, you know, kind of balance of growth and profitability.
Okay. That's helpful. Michael, just in terms of, you know, configuration, both in commercial, which is much more important for you and in consumer, just given the weak macro and also given the lower component pricing in NAND and display, what are you seeing around configurations? How do you think that might impact gross margins?
Well, again, here I go back to the end user experience. You know, inside companies, they figured out that the end user experience is what the employee most associates with the company's, it's sort of being a forward-thinking company. If they have a great experience, they're happy, they like it, they feel like they have the tools to be empowered. If they're not, the opposite is true. We're not really seeing any change in that. Not all PCs are created equal, right? We're much more focused on consumer, non-Chrome. You know, those are generally more than three times more valuable than a Chromebook. We're well-positioned. We've got deep relationships with the customers. We have a, you know, unique direct sales motion as well as channel partners and a strong attach. Look, again, 80% of it is commercial.
Our CSG business has sustained revenue profitability growth over the long term. 8% revenue growth and 12% operating income growth from FY 2018 to FY 2023. In commercial PCs, last year we gained 140 basis points of share, 500 points over the last five years, and 1,000 points over the last 10 years, and we still have a long way to gain share. You know, certainly if you look at this part of the industry in terms of share of revenue and share of profits, we're absolutely the leader.
Yeah. No, no question about that. I was curious, Michael, there's not been many alternatives in terms of silicon for PCs in terms of processors. You've seen Apple come out with its own M1, M2 chips. Do you think that poses any risk to A, Dell's business? B, would you be interested in buying those chips if they were actually available to buy?
There are more alternatives showing up every day, Wamsi. You know, competition has been a good thing, and it's been good for customers, it's good for us. Historically, kind of the open architecture of the PC has benefited from scale and competition. You know, over 90% of the PC class CPUs and graphic silicon are being developed by companies that openly sell their parts. You know, Intel, AMD, NVIDIA, Qualcomm. These companies are making significant investments to, you know, be competitive and stay competitive. Arm, as you know, is now available on PCs, and that's gonna increase in the future. Microsoft is continuing to make investments in application compatibility, and applications like Office are being launched, so they run natively on Arm.
Qualcomm is investing in high-performance Arm CPUs from the IP they acquired through a company called Nuvia, which we know a lot about 'cause we were early investors in it.
Yeah.
You know, we're certainly working with Arm, you know, more and more. Even further out things like the RISC-V open source instruction set. I think, you'll see a lot more in that space soon.
Okay. No, that's great to hear. Michael, just to wrap the discussion around PCs, you mentioned, you know, this large install base with a propensity to refresh. The refresh is coming. Other than the fact that notebook replacement cycles and notebooks have become a larger part of the install base, the replacement cycle is faster, what would you say are maybe a couple of key things that can drive refresh over the next call it a year or so?
You know, I think it's the. You know, first of all, we're asking these devices to do more and more. One of the things that is driving some demand is people coming back to the office, right? Because they sort of worked really hard to get the thing at home working great. Now they go back to the office and it's too old. They don't have the right display. They don't have the right video camera. They can't do all the things they want to be able to do. You know, I think the ongoing tightness in the labor market for skilled knowledge workers, that means they're gonna demand to have the latest tools to make them productive.
You know, all of that plus you're just gonna have this wave of systems that get older and older and, you know, we were just talking about all these new microprocessors that are coming. Well, they're higher performance, they use less power, displays are getting better. All of that is gonna be positive for the refresh cycle.
Yeah. No, that makes a ton of sense. Maybe pivoting to ISG, and this is maybe even a broader like financing question, but we've seen a rapid increase in interest rates, and so the cost of financing hardware has gone up dramatically. At the same time as the return thresholds for new projects are higher, how would you say this is affecting demand within ISG and more broadly? Like what how are customers thinking about dealing with the change in rates?
You know, it's hard for us to see that in a micro sense. Certainly, you know, there have to be businesses that have been refactored in the economy as interest rates have gone to sort of, you know, non-nonzero levels. You know, I wouldn't call that a huge factor in our demand.
Okay. Understood. In ISG, the backlog in servers is sort of normalized. How do you see server both unit growth trends, especially in light of the new product launches at Intel in the second half of this year? How are you thinking about the growth and if there is a server refresh cycle that might be emerging again?
You know, we grew server revenues 5% in the Q4. You know, ASPs have been pretty good. We've had nine quarters of consecutive growth in servers year-over-year. Look, we gained 127 basis points of share in mainstream servers and 350 basis points over the last five years. Look, I do think the market's going through a period of digestion right now, and we said in the Q4 on the call that we expect ISG to be down mid-teens probably for the full year. We've launched our 16th generation PowerEdge. That's also a refresh cycle, right? Because you've got systems that have significantly better performance, use a lot lower energy consumption, particularly important in Europe and Japan as examples.
The innovations that are coming out of Intel and AMD and NVIDIA, you know, I think will ultimately cause the cycle to restart. You know, a digesting period for a bit here, but I'm confident that the long-term, you know, growth in data and compute and storage, AI will, you know, bode very good things for our server business.
Yeah. No, that makes a lot of sense. Just on the near term, you know, digestion comment, right? Like how should we be thinking about server pricing in that weaker demand environment? You know, you run an amazing supply chain. You guys are so nimble and so well-tuned to commodity price changes and so many other factors. That given that expertise in supply chain and your ability to take share, would you use prices as an incremental lever during this kind of softer period to take incremental share?
Yeah, I think you'll see us be pretty price disciplined and, you know, it's not really clear to us that it's that elastic. We'll be competitive, but, I wouldn't expect, you know, big changes there. Look, we have seen more cores, more memory, more AI GPUs, you know, that's driving bigger servers. That's generally helpful for ASPs. You'll have some deflationary input costs and, you know, that'll certainly find its way into the system. Yeah, I would expect us to be price disciplined.
Okay. That's, that's helpful. As we think about storage, maybe just pivoting to storage. We've seen a lot of your competitors start to talk about a slowdown, especially in the all-flash area. What is Dell seeing in this market?
You know, we operate in a very broad market and, you know, we have the ability to kind of pivot where we see demand. We're in all-flash, we're in hybrid, we're even still in those, you know, old things that people call hard drives. We're number one in all of them, right? You know, we're bigger than number two and number three and number four combined. You know, in any sort of derivative of it, you know, we're also number one. We gained share, you know, last year. We gained four points of share in the mid-range over the last five years. Very pleased with our momentum, and we've had, you know, P&L growth in the last four quarters.
you know, for overall storage, seeing some change in customer behavior, some lengthening of sales cycles, some caution. It's not a surprise to hear, you know, that there have been some, you know, some of that going around. Look, the growth in data continues to be exponential and very strong. The growth of the edge, you know, multi-cloud, customers' appetites to be more digital. You know, I'm confident we're in a great position. Even with our leading share position, there's still a lot of share to gain.
No, that's for sure. I mean, you guys have. I think going back several years, you actually recovered a lot of share from maybe the lows post-EMC integration. From there to now, your share has roughly doubled back again, or maybe not quite that much, but it's been a significant increase over the last several years. It's not at historical highs, but still, it's increased significantly.
We made a number of investments to better position the portfolio. You know, we had way too many platforms, so we kind of improved all that. That's unlocked investment capacity and, you know, we're executing better as you see. Last quarter was a record quarter for us in storage for all of history.
Yeah. Which is saying a lot for Dell. Michael, how do you think about HCI and hyperconverged? Is that still a large growth opportunity, or is that now with the way that people are thinking about their infrastructure, you know, maybe not quite the area of focus it was a few years ago?
It's another area where we're number one. We have 37% share in hyperconverged. We're bigger than number two, number three, number four, and number five combined. And look, customers are, you know, increasingly focused on next generation Tier two storage architectures, and we have two leading platforms there, our VxRail platform, which we jointly develop with VMware, and our own software-defined offering based on PowerFlex. That's really growing fast, particularly with large companies. Your company is one of the companies. But lots of great companies out there. You know, all of this is also part of multi-cloud and kind of these expanded partnerships around container orchestration. HCI is a large opportunity.
I also think you're gonna see a lot of HCI at the edge, because if you think about an advanced manufacturing company with 150 locations or a retailer with 15,000 locations, you know, or, you know, you're out in the, you know, natural resources, you've got locations, you know, spread out all over the world, you're connecting by satellite. You need an all-in-one appliance that kind of runs everything, and that's what HCI is perfect for. We've now got kind of rugged appliances for the edge that are really HCI-driven. You know, I think we're well-positioned here. It certainly continues to be an important category, and it's kind of the fusion of servers and storage in one. You know, not surprising that we would be the leaders there.
Got it. I know that on-premise service has, you know, really started to hit some traction. Curious what you're hearing from your customers on APEX and your on-premise service initiatives.
We've had managed services and subscription for more than a decade. In, you know, May of 2021, we announced APEX to deliver a, you know, cloud-like modern IT experience, including multi-cloud. The capabilities continue to expand. I mean, we're just piling in with all sorts of new advancements in the portfolio, from data protection to cyber recovery to containerized multi-cloud and obviously managed services. Customer reaction and feedback and demand has been strong. We reached a nice milestone last year in Q2, you know, disclosing that the APEX annual recurring revenue is now over $1 billion. We've more than doubled the number of active customers over the course of the last year. As I said, the portfolio continues to grow. We have APEX Hybrid and Private Cloud.
We have APEX Data Storage Services, high-performance computing, backup services, cyber recovery. Our Flex on Demand and data center utility. A week or so ago, we announced our APEX Managed Device Services for client, there's going to be a whole additional blizzard of more at Dell Tech World. You know, for us, this is a super important initiative. Customer and partner adoption is strong, you know, it's also a nice TAM expansion.
Got it. Maybe pivoting a little bit to the channel. You know, how are you thinking about the focus on the channel for Dell? You know, do you think your distribution's kind of optimal? Do you think you need to double down on the channel? What do you gain or lose by incremental investments in the channel?
We like the configuration we have. You know, our business, as you know, was, you know, a little over $100 billion, roughly 50/50 split between direct and channel. We have, you know, the largest direct go-to-market sales force in the world, 32,000 strong, and we also have over 200,000 channel partners. They give us reach and solutions on top of our products that, you know, provide additional access to the market. Strategy's working well. You know, we're pleased with the partnerships that we have with the channel and kind of like the mix that we have.
Okay, great. Michael, I'm curious, you know, I mean, Dell is trading at this pretty, you know, inexpensive valuation, and, you know, it begs the question, what do you feel investors don't understand about the company? Or what do you, what do you think is misunderstood about the company?
You know, I think it's a good time for long-term investors to take a serious hard look at Dell Technologies. We are number one in all of our core markets, and we're structural share gainers. You know, we've gained nine points of share in server revenue over the last 10 years. We've had 10 consecutive years of share gains in the commercial PC market. In storage, by far and away, we're the leader. We've overhauled the portfolio. You know, we've had some very nice consecutive quarters of growth here and gained 85 basis points of share, you know, last year. Even within those large core areas, you know, where we generate very strong, predictable cash flows, as I said earlier, we have a lot of share to continue to gain. You know, importantly, we've got some long-term tailwinds in those markets.
Infrastructure is gonna be multi-cloud and hybrid. It's, you know, that's what we're seeing. Edge and telco are meaningful growth opportunities. The PC is essential to productivity, and, you know, we're certainly, you know, heavily indexed to commercial. Look, you can count on us to do what we say we're gonna do and, you know, continue to create a lot of shareholder value in the coming years. If you look over the last three years, we've grown our revenue 6% compounded and EPS, 18%. Again, $18.5 billion of adjusted free cash flow, returning $4.5 billion to shareholders, upping our dividend 12%, and we continue to demonstrate our commitment to shareholders beyond the dividend. We simplified the capital structure. We paid down $30 billion in debt.
We spun VMware in a tax-efficient way. Let me be clear, future cash flows will be returned to shareholders. look, in Dell Technologies, you've got the opportunity to buy a competitively advantaged business in a long-term, stable, attractive market with a management team that has an unrivaled say-do ratio at an incredibly attractive valuation. yeah, I think it's a good time for long-term investors to take a hard look at Dell Technologies.
Yeah, no, that's a very compelling case you're making right there, Michael, and I'm sure people will take a hard look at it. You know, one of the questions we get sometimes is, you've had a long, very fruitful partnership with Silver Lake. Any thoughts on sort of their long-term commitment to be a shareholder as well?
They haven't expressed any changes in their commitment to me. You know, I think they may have distributed a super small amount of shares, but I think they moved a lot of their holdings into some of their newer funds.
Got it. Okay. Obviously, they're free to do what they want, but I, you know, understand that.
Yeah. We do not act as a group, so they, you know...
Yeah.
-they're free to do what they want.
Right. Well, we're coming up to the top of the hour, and, Michael, I really, really appreciate all the insight and the time you have taken. I guess, you know, you do have a CFO change underway, so I'd be remiss to not ask you, do you feel that you have the right team in place now to lead Dell? Just maybe talk about the depth of the talent bench at Dell.
Yeah, I do. You know, look, Tom had a great run, 26 years with the company and about 9.5 as our longest serving CFO, and we're excited to see Yvonne, which, you know, many of you know and have met 'cause she's been on the circuit for a while here and sort of done every job in finance, and she's completely ready to be CFO. Yeah, we have a deep bench inside the company. You know, many of you know Jeff Clarke, who's been with me for 35 years now, maybe 36. You know, Chuck Whitten, you know, while he formally joined two years ago, you know, he's been engaged at the company for, you know, well over a decade. Jeff Boudreau leading our ISG business, 25 years of Dell EMC experience.
Sam Burd leading our CSG business, 24 years of experience. We have a strong, talented team and a deep bench behind that. Look, you know, if you look historically when, you know, when people don't work forever, right? Some people retire, right? As you saw with Tom, we're generally able to replace them internally with the deep bench that we have, and we're in a good position there.
Well, Michael, I really appreciate you taking time again to be with us. Yeah, as always, really appreciate your candor, your very straightforward answers, and I think the message is very loud and clear about, you know, the focus on capital return and essentially returning the free cash flow to shareholders. Really appreciate you highlighting that, taking the time to be with us, and I really look forward to seeing you at Dell Technologies World in person and best of luck for the year and looking forward to speaking to you soon again.
Thank you, Wamsi. Great to be with you, and we'll see, we'll see you at Dell Tech World. Take care. Bye-bye.
Take care. Thank you, Michael. Thanks everyone for joining us. If you have any follow-up questions, definitely reach out, and we'll try our best to get it answered for you.