Dell and VMware CEOs on China tariffs: Plan for the worst, hope for the best

VMware CEO Pat Gelsinger, sitting on the left, says his company is planning for a two-block world in light of the trade war with China while Dell CEO Michael Dell says his company has a global supply chain big enough to support the China and U.S. markets. (FierceTelecom)

SAN FRANCISCO—Whether President Trump is or isn't making significant strides in trade talks with China, Dell CEO Michael Dell and VMware CEO Pat Gelsinger plan to carry on.

Speaking during a media Q&A on Monday at VMworld in San Francisco, Gelsinger said his company was making plans for a two-trading-block world. Gelsinger said he didn't see a quick resolution to the trade war with China, which includes tariffs levied by both countries.

"We see the world increasingly becoming two trade blocks," Gelsinger said. "You have one where we're heavily partnered with China, and you have the U.S. and the other Western trade companies. We believe every company needs to determine how it lives in a dual-trading-block world."

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Assuming that it will be a long-term two-trading-block world, Gelsinger said that companies needed to build up their supply chains and engagements with their customers and trade partners.

"What VMware is doing is we're saying we're committed to China," Gelsinger said. "We're adjusting how we work with that portion. At the same time we're super committed as a U.S. company to build the partnerships and overall workforce to comply with all of the laws of both countries."

The volatile situation of the trade war with China is causing market uncertainty for telecommunications companies in particular. Some of China's U.S.-based vendors aren't certain what they can or can't sell to Chinese companies such as Huawei.

In May, the U.S. added Huawei to its Bureau of Industry and Security Entity List, which barred Huawei from doing business with American companies. While the Trump administration and others have maintained that Huawei installs "back doors" in its telecom gear to gather info for the Chinese government, Huawei has said that's not the case and that it's being used as a pawn in the overall trade war.

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While the topic of China tariffs didn't come up during VMware's second quarter fiscal earnings call last week, Cisco CEO Chuck Robbins acknowledged on his company's fourth fiscal quarter earnings call earlier this month that his company was impacted by the trade war with China.

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Speaking at the same Q&A as Gelsinger, Dell CEO Michael Dell said his company has made some adjustments due to the tariffs, and would continue making adjustments going forward.

"Our first priority is to ensure continuality of supply to our customers, and fortunately we've been able to do that," Dell said. "We have a very substantial business inside of China and outside of China that certainly relies on our global supply chain. We have factories all over the world, and I think we have a flexibility to continue to thrive both outside China and inside of China. Certainly, we'll speak with government officials to encourage them to continue to work together to find a resolution to the current tensions that we don't find productive."

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