A Private Dell Should Boot Michael Dell

by Jonathan Berr | January 15, 2013 8:52 am

Shares of Dell (NASDAQ:DELL[1]) surged more than 12% after Bloomberg News reported Monday that the beleaguered personal computer maker was in buyout talks with private equity firms[2]. Too bad CEO Michael Dell didn’t pursue such a deal when I suggested it[3] — in August 2011.

Shares of the company Dell founded in his University of Texas dorm room in 1984 traded at $14.21 on the day InvestorPlace posted my column. The stock closed Monday at $12.29, a decline of almost 14% during that period — counting yesterday’s run-up. Pretty pitiful performance. Shares of the Round Rock, Texas, company have plunged more than 50% since 2007, when Michael Dell returned and ousted Kevin Rollins as CEO.

Dell, the man who has mulled buyout offers before, has not done Dell the company any favors. It seems to have missed the boat on practically every tech trend of the last decade or so.

Who can forget the Streak 7 tablet computer, which got scathing reviews? Dell’s customer-service problems are legendary. A friend and I once priced the same computer on the company’s website at the same time — and got two different prices. I never could figure that one out. Since then, I haven’t gone near a Dell, and apparently I wasn’t alone.

Revenue in the third quarter slumped 11%, and Dell predicted that the fourth quarter would also show a decline, reversing an earlier forecast for an increase. Demand for PCs, once the company’s cash cow, continues to wither. That’s especially sad given Dell’s recent acquisition binge and the introduction of Microsoft‘s (NASDAQ:MSFT[4]) Windows 8 operating system.

Dell lost its PC market leadership to Hewlett-Packard (NYSE:HPQ[5]) in 2006, and things have gone downhill since then.

According to Gartner[6], Dell had 10.5% of the worldwide PC shipments in the third quarter, trailing Lenovo and HP. A year earlier, Dell had 11.2% of the market. About the only hope that Dell could jump-start PC sales would be if it developed an extraordinary machine that could travel through time or enable a short, chubby guy to slam-dunk a basketball.

Short of such miracles, the PC’s day is done, which puts Michael Dell in a quandary.

While he might have entertained the idea of trying to merge with HP, such an arrangement would probably have aroused the suspicion of antitrust regulators. Besides, HP CEO Meg Whitman has plenty of her own problems[7] and wouldn’t want the considerable headaches that would come from trying to integrate Dell. Sad to say, the best hope for Dell the company is — once again — Dell the man.

But not for his visionary leadership. According to Bloomberg, Dell owns about a 15.7% stake in the company, which should make it easy to get financing. Actually, one of the discussions the private equity firms are probably having with Dell is whether he’s the right person to lead the company. It wouldn’t surprise me if the investors insist that Dell find a strong operational executive like Ford Motor (NYSE:F[8]) found in Alan Mullaly, who’s credited with expertly steering the automaker through the worst economic downturn since the Great Depression.

Maybe they would want more of a technologist like Marissa Mayer, who has breathed new life into Yahoo (NASDAQ:YHOO[9]) since becoming CEO last year. Any change would be an improvement.

Clearly, Dell was the right person to lead the Dell he founded in its early days. But he’s not the right choice now.

As of this writing, Jonathan Berr didn’t own any securities mentioned here. Follow him on Twitter @jdberr

  1. DELL: http://studio-5.financialcontent.com/investplace/quote?Symbol=DELL
  2. buyout talks with private equity firms: http://www.bloomberg.com/news/2013-01-14/dell-is-said-be-in-buyout-discussions-with-private-equity-firms.html
  3. I suggested it: https://investorplace.com/2011/08/should-dell-go-private/
  4. MSFT: http://studio-5.financialcontent.com/investplace/quote?Symbol=MSFT
  5. HPQ: http://studio-5.financialcontent.com/investplace/quote?Symbol=HPQ
  6. According to Gartner: http://www.gartner.com/it/page.jsp?id=2194017
  7. Meg Whitman has plenty of her own problems: http://slant.investorplace.com/2012/10/meg-whitman-hp-ceo-analyst-speech-hpq-stock/
  8. F: http://studio-5.financialcontent.com/investplace/quote?Symbol=F
  9. YHOO: http://studio-5.financialcontent.com/investplace/quote?Symbol=YHOO

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