October 30, 2013

Dell Goes Private Figuratively and Literally: Does CEO Michael Dell Get His Just or Unjust Rewards?


Ever since this particular buyout emerged back in January 2013, we've wondered why Michael Dell should be able to walk away at a bargain price with a company he essentially and assiduously helped drive into the ground over the last five years or so. If this was actual theater we would have to classify the entire thing a farce, yet with $25 billion on the line it is anything but.

It isn’t often (in fact "never" would be accurate) the case that we have found ourselves endorsing Carl Icahn in any M&A deal of any magnitude, yet with Dell we were rooting for Icahn to pull off a win. Alas, he didn't, at least not in any way that might have helped rescue both the large and small investors who almost unanimously lost huge sums of dollars betting on Dell. Yes, the market always comes with numerous risks -- and those risks absolutely include ending up with a company saddled with bad or ruinous management teams -- and that is part of the investor game. But …

It is always buyers beware -- but in this case Michael Dell, who is part and parcel of that management team, ended up with one hell of a huge reward at the expense of its investors. We often see ruinous management teams walk away with substantial rewards, but in this case the reward was truly outsized.


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Well, there isn't anything left to say about it. In the end, enough of those same investors chose to vote their shares to deliver unto Dell that which is apparently Dell's - again, figuratively and literally. They made the choice, and so be it.

As of yesterday Dell is now free to do whatever it wants, however it wants, without need of reporting anything to the public communities of investors and financial it has so poorly served over the last five years. Dell is still certainly an outsized company. It has a huge pool of employees and it will continue to deliver on most of what Dell has always delivered on.

But will CEO Dell really be able to change things up enough -- strictly through the benefit of now being private -- to drag Dell successfully into the mobile world we now fully live? By going private, CEO Dell believes he can now make huge and potentially risky dollar investments in tomorrow's technologies that will affect both the immediate top and bottom lines in negative ways that would have been disastrous for it to do as a public company. As a private company only Dell, Silver Lake and Microsoft will know those numbers. In anonymity there is certainly freedom, but alas that is not a guarantee of success!

CEO Dell is far outside the realm of what he knows and understands. Whether or not there are any brilliant minds within Dell that can take the company forward into the mobile realm remains to be seen. It also remains to be seen if CEO Dell will allow any such people to breathe enough air and wield enough control to succeed. We very much doubt it.

Of course a key reason Dell and Silver Lake are in this is to eventually re-launch Dell through another IPO. Long term, if they pull it off the investors who voted to give the company back to CEO Dell will have gotten their own just rewards. And we will need to pity the investors that did not want to give CEO Dell such a bargain.

We very much doubt we'll ever see Dell re-emerge in any successful manner. The company will simply continue to diminish. On a far larger scale, we will see the BlackBerry fiasco happen all over again. It will take far longer than it took BlackBerry, but that is Dell's ultimate fate. Going private won't prevent this from happening.




Edited by Rory J. Thompson



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