After more than a year of fraught wrangling, Michael Dell has won the critical vote to take the company that he co-founded private again. For the first time in more than 25 years, Dell is set to be a private company again. So will this save Dell?
For Michael Dell, this development caps off a torrid year in which he has fought, at times tooth and dagger, to save the company that he founded. Now, after more than 40 years in the computing business, Dell must summon the immense amount of energy, innovation and foresight needed to make his company relevant and competitive again.
Michael Dell ran into the troublesome and militant shareholder Carl Icahn during the year of negotiations. Icahn, at times a maverick but also a billionaire investor of immense talent, was determined to keep Dell public. Ultimately the stalemate was broken when Michael Dell raised his offer by $0.10 per share to $13.75 per share, which he made plainly clear was his “best” and “final offer”.
This was enough to persuade Icahn to step aside. Privately he had admitted for some time that he saw Dell’s best chance of surviving the fall out of the ‘post-pc era’ lay in the leadership of its founder. His bid was not some snobbish blockade attempt to keep Dell out of his company, it was simply a case of eliciting the best deal for him and his fellow shareholders. Icahn, like everybody else, will now turn their gaze towards the new Dell, to see if the founder still has what it takes to achieve his new goals for the company.
In order to achieve this goal, Dell has partnered with Silver Lake Management, putting forward a $24.9 billion package to buy the company back. For a long while it seemed that the company’s shareholders would block his bid, but ultimately the deal has come good.
“I am pleased with this outcome and am energized to continue building Dell into the industry’s leading provider of scalable, end-to-end technology solutions,” Michael Dell, shortly after the deal was made public
Michael Dell’s new vision for Dell is based on the recipe that made the company in the first place. A enigmatic partnership between his vision and the deep pockets of his private equity funders, allowing him to forge out a clear and concise battle plan for the company, critical a plan shaped and molded by just one man.
For too long, Dell has been a company damaged by its fragmented ownership. The various factions, lack of clear leadership and inability for one man to forge the company around his will, have all conspired to make Dell less and less relevant in the Apple and Samsung era.
The new goal for Dell: Cut through the clutter and focus on the customer, with “single minded” purpose and a new wave of innovation.
The new Dell – How Michael Dell plans to save Dell in the post-pc era
Ever since Steve Jobs launched the first iPad in 2010, PC sales have been declining steadily. In truth, they were declining long before the iPad forged out the tablet computing sector, but this device was a tipping point. Jobs had shown the world a device which was much better suited to the home, cementing the positioning of the almost dinosaur PC as an office tool only.
The tablet computing game has not featured Dell – it has totally bypassed them – as they suffered through the fallow years of poor management and a lack of strategic vision.
For Mr. Dell, the future does not lie in a belated attempt to get into tablets, instead it lies in a quick transition towards enterprise and services.
This of course, is no cheap tactic, hence why Mr. Dell has lined up with Silver. Their deep pockets and his vision could be the ticket to make this work though.
The strategy would not have been compatible with a public company
though. The strategy involves a fairly marked decrease in net-margins, and that would have been a recipe to tank the stock price. The stock market can be an unforgiving place, and stock prices are typically governed by quick indicators. Net profitability, margins, revenues can all be tick boxed and trended – typically by computers that don’t understand strategy – so when one marker takes a perceived dive, the computers start selling their stock.
This would lead to an element of panic and a raft of negative stories around the company. The press is all to quick to sensationalise stories at the best of time, and this would pour the pressure onto the leadership.
It would also likely lead to high profile employees taking the high road, not to mention an almost insurmountable difficulty in attracting stellar new talent.
All of this can now be avoided by Dell becoming a private company again, opening up the chance for them to ‘hide’ behind their newly re-found cloak of secrecy, offered by the radically different rules which private companies have to adhere to verses their public counterparts.
So can Michael Dell save Dell?