(Updates with S&P downgrade in eighth paragraph.)
Sept. 11 (Bloomberg) -- When Dell Inc. President Marius Haas was still a rising executive at Hewlett-Packard Co. in 2005, his new boss Mark Hurd entrusted him with a critical task: unearthing sales weaknesses and inflated costs.
Haas obliged, arming Hurd with candid information that spawned a flurry of cost-cutting and sent Hewlett-Packard on a five-year run of soaring profits and shares.
“He was the first guy I ran across who tried to convince me how the place actually ran -- and how it didn’t run,” Hurd, who was Hewlett-Packard’s chief executive officer from 2005 to 2010, said in an interview.
Improving Hewlett-Packard under Hurd was easy compared with the task Haas now faces as the executive in charge of the $13 billion-a-year enterprise-technology business at Dell, which is poised to be taken private in a $24.9 billion deal that shareholders will vote on tomorrow.
Haas, 46, was hired a year ago by founder and CEO Michael Dell to run the company’s enterprise server, storage and networking business. His group is central to Dell’s plan to transition from PCs, a dwindling business whose operating income dropped 71 percent in the most recent quarter.
Instead, the Round Rock, Texas-based company wants to be a key supplier of computer systems that can power consumer websites, run complex data analysis and underpin financial applications that businesses depend on. Most of these products fall under Haas’s bailiwick.
The shift won’t be easy. While PC revenue shrinks, Dell’s enterprise-computing business has struggled to gain ground after spending $13 billion on 20 acquisitions since 2009 that have borne little fruit. Competition in the field is vicious, with rivals including Cisco Systems Inc., Hewlett-Packard, International Business Machines Corp. and EMC Corp. able to outgun Dell with their breadth of products.
Standard & Poor’s downgraded Dell’s corporate credit rating four levels to BB- from BBB today, citing concern that the CEO’s buyout would create a more leveraged capital structure and diminished free operating cash flow, hampering the company’s ability to invest in new businesses and technologies.
Haas said he’s trying to transform Dell into a partner that businesses can count on for every technical aspect of a project -- not just a supplier to customers’ procurement departments.
“Enterprise-class clients are realizing Dell is a formidable player,” Haas said in a recent interview. “In the past we were not in consideration.”
Haas, who was born in the Dominican Republic and has lived in Holland, Honduras, Venezuela, South Africa and Mozambique, has some assets to lean on. His group has been a rare bright spot at Dell, whose estimated net income of $1.11 billion this year is less than the company’s profit in 1999, when revenue was less than a third what it is now. Sales in Haas’s enterprise solutions group rose 7.7 percent to $3.3 billion in the fiscal second quarter, and networking revenue increased 19 percent.
The executive, who speaks Dutch, English and Spanish, has the backing of Michael Dell, who hired him from private equity firm KKR & Co.
Haas has “quickly jumped in to lead the development of our enterprise strategy and done a fantastic job in a difficult economic environment,” Michael Dell wrote in an e-mail. “He’s assembled a great team that is really firing on all cylinders.”
Haas’s parents were born in Asia and were interned as children in Japanese prison camps in their native countries during World War II. His father’s job at a Dutch shipping company meant the family moved around the world, and Haas arrived in the U.S. by way of a Connecticut boarding school after the Venezuelan currency collapsed in 1983. He went on to earn degrees from Georgetown University and Thunderbird School of Global Management before carving out a career in strategy and business development at Intel Corp. and Compaq Computer Corp.
He landed at Hewlett-Packard when it bought Compaq in 2002, working on acquisitions and later managing the networking group. One big job: handling the difficult integration of Hewlett- Packard’s $13.9 billion purchase of Plano, Texas-based Electronic Data Systems Corp. in 2008, which involved absorbing 135,000 people, said Shane Robison, CEO of Fusion-io Inc. and Haas’s former boss.
“Marius basically lived in Plano for six months and helped people get through the emotional difficulties,” Robison said. As part of the process, Haas kept detailed tabs on people, finances and operations, Robison said. “I don’t know how he kept track of it all -- maybe he kept notebooks.”
Now Haas has jumped up several executive rungs to help Dell reinvent his company, and for the first time is running a major division and reporting to the CEO.
Another challenge is that Haas lacks a background in engineering or sales.
“I know what my strengths are and I know what my weaknesses are,” Haas said. “The question is, how do I use my team to fill the gaps?”
Dell is closing in on being the No. 1 supplier of mass- market Intel-based servers -- its revenue from the machines rose 11 percent to $2.19 billion in the second quarter, while Hewlett-Packard’s revenue fell 15 percent, according to market researcher Gartner Inc.
Haas will need to accelerate broader enterprise growth for the turnaround to succeed. Returns on Dell’s acquisitions, meant to bolster sales of software, storage and servers to corporations, are lagging behind the company’s 15 percent target, and many deals have required more investment to grow, according to a July presentation by the special committee of Dell’s board overseeing the buyout.
The move into cloud computing is also sapping server margins and cutting out the need for outsourced technical support. The stock plunged more than 30 percent last year before starting to rally in January as reports of a buyout surfaced.
So far, Dell hasn’t effectively paired server sales with higher-margin storage and networking products. After the CEO and partner Silver Lake Management LLC take the company private, Dell plans to direct more money to selling the kind of data- center computers, storage devices and networking gear that Cisco, IBM and EMC claim as specialties.
“If you look at Dell and HP, they’ve both tried to be like IBM for the past five years,” said Shaw Wu, an analyst at Sterne Agee & Leach Inc. “Its been a tougher-than-expected transition.”
One of Haas’s main jobs is putting Dell in a position to persuade chief information officers to buy more of Dell’s data- center gear by helping them understand how it all works together. Haas hired Brian Humphries, a former Hewlett-Packard strategy executive, to lead Dell’s European sales. Sam Greenblatt, another ex-Hewlett-Packard technical manager who also worked at CA Inc., is Haas’s chief technology officer.
Haas said he leans on Greenblatt in sales meetings. The two executives can stand at a whiteboard “and a 30-minute meeting turns into a 3-hour meeting at the request of the customer,” Haas said. “I’m not extremely deep on the technical front, but when I have Sam with me, he’s a perfect partner.”
If the shareholders ratify the buyout this week, the company’s overhaul will proceed, with Haas leading the push. In the meantime, he’s been working to reassure customers spooked by Dell’s operatic buyout saga that’s dragged on for much of the year. Earlier this week, activist investor Carl Icahn -- who had led shareholder opposition to the Silver Lake-led takeover -- said he was giving up the fight to win control of the computer maker, removing a major obstacle to the bid. The buyout group has secured enough votes for approval, according to a person with knowledge of the matter.
While awaiting final word on the deal, Haas has already started shipping products that incorporate more of Dell’s intellectual property and repaired a flagging storage lineup. He’s also scouting deals he hopes will be more effective than past acquisitions.
“Don’t confuse activity with progress,” Haas said. “If there’s an opportunity to accelerate the pace, we’ll do it.”
--Editors: Jillian Ward, Ari Levy