Why ICAHN is a Bad Fit for Dell

Tim Bajarin / July 5th, 2013

I have had the privilege of following Dell from its inception. I became a PC industry analyst in 1981 and have tracked the PC industry from its beginning. In the process I have had the privilege of interacting with every one of the PC and CE companies at the highest levels for 32 years. Those who have followed my current writings in TIME’s online Tech section, PC Magazine and our own publication called here as well as my commentary on all of the major TV and radio networks and business publications know that I have been chronicling the tech market for decades.

I have watched PC companies come and go and understand well how the industry developed and what it will take to compete in the future. I have seen the market for PCs grow exponentially and become the heart of Information Age. Although the role of PCs has changed over these decades, it is still a key component of any business and consumer’s life, even if some of those computers are now called tablets and smartphones.

I have been watching closely the competing bids to take Dell private and am quite concerned about any outside plan that would not guarantee that Dell remain whole and execute as a single company with all divisions contributing to its success. While I have respect for Mr. Icahn, I am not convinced he really understands the dynamics of the tech market and what it takes to compete in this fast changing marketplace. The tech industry is not like the oil and gas industry where things change slowly. I believe that for Dell to compete and grow it must be run as a single unified company where all divisions work together to achieve their vision and goals. But if history is our guide, keeping Dell intact is probably not in the plans of Mr. Icahn and his team.

One Company, One Vision

A few months back, Dell held its annual industry analyst days in Austin. Like all of my colleagues at the event, we went to the conference to see first hand how Dell saw the market, what role it would continue to play in a technology world that is rapidly changing and how they planned to grow as a company in light of the increased competition and shifting demands from business users and consumers alike.

I sat through two days of speeches and dedicated divisional information sessions and in the end, came away with a picture of a company that was much more in control of its future than I had suspected. I found that they had diligently laid out the necessary building blocks that, when tied together, could give them the ability to weather the changing dynamics of the tech market today and had a solid vision that can drive it forward in the future. One that includes being a hardware, software, and services company offering the whole package for many key growth segments.

One very important thing that I came to understand from these meetings is that in order for Dell to navigate these choppy industry waters, it needs to be able to execute this vision in a measured and strategic way, which will take time. It is clear to me now that this is the main reason Michael Dell wants to take the company private. Trying to rush these things would be difficult given the need to make these changes to Dell’s future business models so that it can be done properly and executed without the pressure of always having to keep the investor community happy each quarter.

The building blocks of powerful server hardware, software and services, world class security, expanded IT services and even their PC business that, as we were told, drove 50% of all of their enterprise sales, are key components that when woven together as a single unit gives Dell the opportunity to remain a major player in the world of technology. We were also told about new tablets and other mobile products in the works that, when they come to market later this year, will make Dell very competitive with Lenovo and HP as well as other PC and CE vendors that are all targeting the same business and consumer customers.

I have one key observation that is quite important to this discussion. When I look at Dell, its building blocks and its competitive challenge ahead, I am convinced that they can only remain a powerful player in the tech market if the company competes as a whole, with all of these building blocks they have put into place working in harmony. Every one of their divisions needs to be connected and walking in lock step if Dell is going to succeed.

Servers, PCs and mobile devices need security. IT needs servers, software and mobile device management tools all working together to meet the needs of their mobile users. The future of software distribution is in the cloud and all of Dell’s divisions deliver key parts of a cloud solution that can work together seamlessly if executed properly. Consumers want a company that delivers solid products that they stand by and look to as PCs, tablets and smartphones become more engrained into their digital lifestyles. From what I saw while at the analysts meeting, Dell finally has all of the pieces in place that, when working together, will sustain the company and help it grow if executed well in the face of a tech marketplace that is constantly changing.

I cannot stress how important I feel that Dell operate as a unified entity in order to compete and grow. I have spent many years understanding the machinations of a successful tech company and monitored the shifting winds of business and consumers whose needs and wants constantly change. I can tell you without a doubt that for a company like Dell, HP and Lenovo, all of their divisions and executives have to be on the same page, working and collaborating closely together to provide all of the key components of hardware, software and services if they are to succeed given the current and future market conditions I see ahead.

For the record, I don’t own any Dell stock. I am an independent market researcher with 32 years of experience examining the tech market and this perspective comes from decades of studying how this industry works. In my opinion, if there was ever a time when a company needs to operate as a unified force, it is now.

Providing powerful technologies across hardware, software and services that are all interrelated and interconnected is the key to success in this globalized tech market where vision, order and collaborative leadership is vital to a PC company’s ability to remain competitive and thrive. Any attempt to break up that kind of synergy will only lead to failure.

Tim Bajarin

Tim Bajarin is the President of Creative Strategies, Inc. He is recognized as one of the leading industry consultants, analysts and futurists covering the field of personal computers and consumer technology. Mr. Bajarin has been with Creative Strategies since 1981 and has served as a consultant to most of the leading hardware and software vendors in the industry including IBM, Apple, Xerox, Compaq, Dell, AT&T, Microsoft, Polaroid, Lotus, Epson, Toshiba and numerous others.
  • Bay Area Tim

    Tim, I hold most of your opinions in high esteem, but I just politely, but completely have to disagree with your take on this subject.

    Sorry, but to this reader, your viewpoint sounds EXACTLY like it was scripted by Michael Dell himself, and I can envision him pleading on bended knee, for someone with good credentials within the established tech writer community, to lend credibility to his final, or one more last ditch, attempt at empire resurrection. He himself (and assigns/successors) ran that company into the ground playing the losing game of lowest price for (what else?) lowest quality product, just like most of his competition. Beginning with the completely horrific performance of Windows Vista, and now the utter failure of Windows 8 adoption, I personally see absolutely no reason whatsoever to endorse Dell as a product line, or Mr. Dell, an out of touch executive, as savior. Nor do I see, in agreement with you, Mr. Icahn as able to get the job done, let alone another outsider.

    Perhaps he is/was a good friend, valued acquaintance, or you simply think he is capable of repeating some of his previous accomplishments, many though they were. With an endorsement such as you are currently offering though, you may (?) run the risk of devaluing your future personal online opinions.

    This is just one other person’s online opinion though 🙂

    • benbajarin

      I’ll let Tim speak for himself but I’d be curious on your deeper thoughts as to why you disagree. Dell is making incredible strides in server and cloud computing solutions having just over taken HP for number 1 server share in the US and they will likely get there WW as well. Their acquisitions have made quite a bit of sense for a complete solution across the infrastructure set for cloud computing.

      You may be able to argue the client business needs work, as it does, but I’m not sure you can argue that Dell would be better without a client business which is doing better than most people realize.

      So granted you disagree, which is a valuable aspect to any conversation, please elaborate some points as to why you would think ICAHN’s approach would be better for Dell as a company.

      Or perhaps if you have other suggestions for a turn around for Dell we would of course be interested since we cover them heavily as we do every computing and consumer electronics company as a part of our industry analysis.

      • Bay Area Tim

        Simply put, I don’t think Icahn would be better at all. Nor do I think Dell would necessarily do better without a client business. It’s more basic than that even. i think Dell is, for all intents and purposes, facing an industry sea change, like its competition, that it is unprepared for. Without getting into the weeds on this, Dell’s performance and reputation over the recent past have, to put it mildly, seen better days. It’s a damaged brand with a bleak future, regardless of who may take the helm. The mere fact that its future existence as a whole, ownership, leadership, and potential for break-up are key considerations going forward, sort of contribute to an even further lack of confidence, especially when coupled with a shrinking market in important areas of their traditional business (PCs/clients, and more). The playing field is changing, and I’ve seen little to comfort my lack of faith in them or their major markets. Servers may be an exception. Not everyone is going to make it. Dell may be one of those.

        • benbajarin

          If you have read much of what Tim and I have written about the our confidence in Apple’s vertical model as a differentiator and critical component to competing in the future, then you will understand that we have the same view about Dell regarding cloud. Competing in cloud is so much more than just having servers, and it goes deep through hardware, software, and services. This is a big business. An argument about breaking up Dell, is nearly the same as an argument to break up Apple, the only difference is the sector we are talking about.

          Plus the PC and Post PC era are still riddled with opportunity and I’m pulling for Dell and HP to stay relevant in this space as well. We have much tech industry health ahead of us. Dell needs to be private so they can make decisions Wall St. may not understand and not be punished for it. This is about the next 20-30 or more years not the next 5.

  • James King

    I was very much opposed to Carl Icahn’s involvement with Yahoo when Microsoft wanted to buy it and Jerry Yang opposed it. It’s tough to question Icahn’s business savvy because you don’t become a billionaire by being stupid. But his efforts in tech or related fields have not had great outcomes.

    I’m all for Dell going private and remaining intact. Getting out from under the thumb of Wall St. so it can focus of delivering better value to its customers is something that I think more companies should do.

Protected by Gerben Law