Dell has a big problem and it’s not the one you might think. Although it is true that the PC market has weakened or perhaps more accurately evolved into the tablet market, that is not the primary cause of Dell’s current situation. Dell’s troubles began in 1988 well before Apple’s iPad. In 1988, Dell changed the driving force of its company from innovation and customer-centricness to predictable and stable profits by IPOing.
As you may know, most companies, including private ones, have stock, but private companies do not have to publish the same level of figures regarding short-term finances and are therefore less susceptible to shareholder panic brought on by “professional” analysis of these short-term figures. Michael Dell is trying to take Dell private again in an effort to remove this element from the equation, since he understands what many of Dell’s investors seem not to — that Dell needs to spend a good deal of money to develop more compelling products that differentiate it from its competitors. Put another way, Dell is going to need to take some risks and short term expenditures that are very difficult for a public company, since the press and market tends to be extremely risk averse; of course, finance journalists are quick to blame a lack of innovation yet are even quicker to burry a company that loses money (even for a short time) in an attempt to innovate a new product.
Maybe there is a need for reform of the public corporation system, but that’s just not going to happen; though the recent hoopla with Carl Icahn and Michael Dell makes me wish we could outlaw “activist investors” — in truth, these “activists” are little more than entitled nouveau riche predators who care little for the long-term success of the companies they invest in, let alone the well-being of those companies’ staff.
Needless to say what is possible, however, is to create a generation of CEOs and Presidents that are not beholden to the rat-race of the public market — of course, this can only be achieved if our most promising startups stay out of the IPO game which often means spurning the vast majority of venture capitalists. This path is hard but is necessary if we want to create products and services that are actually worth something, rather than just the next buzzword bingo app.
In the case of Microsoft, little will change either for good or ill as long as the current board remains and keeps active oversight over whatever executive replaces Ballmer. Does this mean that Microsoft is doomed? Hardly, but it does mean that the next world-changing product is unlikely to come from Redmond.
Truth be told, I hope I am wrong and the Microsoft can come back full steam and that Michael Dell will be able to rescue Dell from the vulture that preys on it. Returning to reality, however, it seems that Dell will whither and Microsoft will have no choice but to retreat to the profitable and less risky enterprise market, as its old rival IBM has already done.
