Evaluating The New Dell One Year After Going Private

on November 14, 2014

In early 2013, Michael Dell and his team made the decision to take the company private but got serious push-back from some of their investors. The biggest came from Carl Icahn who felt Dell was undervalued and tried various moves to try and take over the board and kick Michael Dell out of the company. Of course, Dell and his team were not keen on this idea and fought back against Icahn. In the end, Dell got major backing through his own personal wealth and other private investors and, just over a year ago, took the company private. According to a recent Bloomberg article, Michael Dell and his partner, Silverlake, have realized a 90% gain on their investment since the leveraged buyout. The irony here is Icahn might have been right that Dell was undervalued. However, I doubt Dell would have seen this increased gain if Michael Dell had not been in charge.

I spent time two weeks ago at the annual Dell World customer event and got a chance to talk to Michael Dell and some of his executives and tried to take the pulse of the company now that Dell is private. I have known Michael Dell for decades and have to admit that, during the final years before he took the company private, he often seemed weary and not having much fun. Running a public company can beat a person down and I am sure the pressure to perform for investors had taken its toll on him. That does not seem to be the case anymore.

He is the happiest I have seen him in a decade and more relaxed and reassured about Dell and its future. He still has a lot of pressure to perform and stay profitable but the pressure now comes from meeting the needs of his customers, not his investors. This one fact is a big deal. It means they can stay customer focused and not have to deal with Wall Street and its various machinations that require a lot of time and takes their executives away from their core mission to keep their customers happy.

In fact, I know of a few CEOs of public companies who are quite jealous of Michael’s new freedom from the pressures of Wall Street and the type of freedom that makes it possible for Dell, as a company, to respond to market demands faster, be more nimble and be even more free to experiment with new, innovative designs and services that help them provide better solutions to their customers.

More importantly, I saw serious growth. During Dell’s keynote at Dell World, he stated the company delivered nothing but positive outcomes over the last year. Some of these results included seeing year-on-year growth across all regions globally and growing worldwide PC shipments by nearly ten percent year on year in Q3, which led to growing market share in the North American market by 19 percent. Dell gained triple the share of HP, five times as much as Apple, and ten times as much as Lenovo.

Michael Dell also said the company maintained its number one share position in servers in North America and reclaimed the top position in Asia Pacific and Japan, as well as saw double digit growth in revenue year on year in its software business. Dell also said the company claimed the number one position in storage during the first half of 2014, where it grew 14.3 percent compared to declines of roughly seven percent or more by EMC, HP, and IBM.

In a conversation I had with him at the event, he told me close to two thirds of their enterprise business comes through their PC business and he “loves PCs and is highly committed to creating new innovative laptops and desktops” to support the needs of all of his customers.

I also consider this a big deal. PCs are not going away and even if they are not a growth market anymore they still are the workhorses of business and a key productivity tool for students and consumers. Having a company focus on creating great new PC and laptop designs is good news for those who will continue to buy PCs for many years to come.

Dell also showed off a stunning new 5K monitor. It should be a big hit for a company that still considers PCs important and is willing to even innovate in monitors so that their professional users could have the best tools for the jobs they do each day.

In his keynote, Michael Dell also stated, “in an aim to continue this momentum, the company’s future strategy has been aligned to four customer imperatives — transform, connect, inform, and protect”, which addresses the major technology trends of cloud, mobile, big data, and security. The company is focused on providing complete solutions to their customers, which include helping them manage everything from the back end to all end points that connect to these servers and applications. While Dell has been doing this for years, there is a renewed commitment to deliver world class solutions to IT and consumers. I see a new Dell and one committed to being a top level company for the long run.

At last year’s Dell World, Michael and his team had just won the battle against activist shareholders and had taken the company private. At that time, the Dell team was optimistic about their future and their ability to perform and deliver without the pressures of Wall Street.

Given what I saw at this most recent Dell World, I think it is safe to say their bet on themselves was a good one and, if they continue to perform in this same way, going forward they are assured to continue to be one of the top PC players in the market for many years to come.