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Dell Inc Goes Private Hoping to Become the Next IBM

9/19/2013
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Dell Inc is one of many tech companies attempting a turnaround effort in 2013, and in September 2013, the board of directors voted in favour of doing so as a private company. Michael Dell wants to turn the company into a provider of comprehensive enterprise IT solutions.

Three-Month Myopia

The recession of 2008-2009 gave rise to a slew of new ideas, largely critiques of the principals that governed capital markets in years leading up to the recession. The disdain for investor obsession with quarterly results rose to become one of the more fashionable of these new ideas. Many ills of corporations were blamed on the focus on meeting quarterly earnings targets at the expense of long-term growth strategies. This short-sightedness on the part of management stemmed from pressure by the investment community, which interpreted any earnings misses as signs of trouble at the company. Mr Dell’s plans to undertake a prolonged, expensive, painful transformation involving steps that would be unpopular among investors.

Too late to become an IBM

Michael Dell has made it clear that he wants Dell Inc to become a provider of IT solutions for enterprises. This means a focus on servers, software, and post-sale services, what remains unclear is the company’s long-term plans for the computer business. Mr Dell announced plans to invest in expanding the company’s distribution network as well as more active development of new product lines in tablets and tablet-laptop hybrids. Finding buyers for Dell’s computer business is becoming increasingly difficult, and Dell Inc may need to retain ownership of the division and undertake a prolonged and painful wind-down. Dell will likely remain in the computers business over the foreseeable future, but with a shrinking presence especially in the consumer sector. Dell computers
will eventually become complimentary products to the company’s suite of enterprise products.

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