Michael Dell mulls taking PC colossus private
Michael Dell told a conclave of moneymen on Thursday that he has considered taking his eponymous PC maker private.
According to Reuters and others, Dell answered "Yes" when asked Bernstein analyst Toni Sacconaghi if had thought of taking the company private, but declined to answer a follow-up question about what would prompt him to more-fully consider such a move.
He quickly covered his tracks. According to a raw transcript provided by FactSet CallStreet, Dell said that he was "totally committed to continuing to run the business for a long period of time" and that he has "every intention to continue running the company for the foreseeable future".
Dell's admission that he had considered taking the company private caused Dell stock to jump by as much as 6.4 per cent on Thursday — but as of mid-day Friday (in a broadly declining market), it had sunk by over 4 per cent.
Since he founded his company in 1984 — famously on $1,000 and the idea of direct-to-customer computer sales — Dell has been its chairman of the board. He was CEO until 2004, and resumed that role in 2007. He's also his company's largest shareholder: according to a recent SEC filing, Dell held 11.69 per cent of the company's stock as of April 15, 2010.
Dell — both the company and the man — had a meteoric rise in the 80s and 90s, but have fallen on harder times since. In late 2009, the company fell to number three among PC makers worldwide, behind HP and Acer. ®
Take Your Advice to Steve Jobs
Dell should take his own advice he gave Steve Jobs when Jobs returned to Apple......
"I'd shut it down and give the money back to the shareholders."
Private vs. Public
I think Michael Dell taking the company private again is an excellent idea. Having worked for a lot of publicly traded companies I have come to the conclusions that a company's growth and quality really starts to decline shortly after it begins trading publicly.
With a publicly traded company, the CEO is designated by the investors holding controlling interest in the company. Said CEO is required to take direction from the company's chief investors. Investors all too often have no real idea what is actually good for the company. They tend to be driven purely by short term quarterly gains. This leads to the CEO having to do thing he or she knows will ultimately harm the company's long term viability in order to justify his job to the company's chief investors. So every quarter is spent scrambling to meet the projected quarterly gains so that the stock price doesn't fall. While this is not invariably the case, my impression is that it represents the general rule.
Back when Dell was founded, its direction was singular. Michael Dell knew what he needed to do to grow his company. Once the company started trading publicly, even though he is the chief investor, he is still subject to the pressure of having to sacrifice long term profitability in order to keep the stock price from falling. Going private again allows Dell to make the decisions it needs to make to return to its true glory days.
I personally feel this way about all publicly traded companies. It really upset me when Newegg announced their IPO. To me it means the quality of service will start to level off and eventually start its long fall to obscurity.
So, he buys Dell, and when he gets it home discovers that not everything he was expecting was in the box, or the advertised software is a trial version.
He then has to call customer service and try to get his money back.
Good luck with that, Micheal, tell us how you get on.
Paris. just because (TM).