Dell: 2 gambles at a time

The idea of Michael Dell to make Dell Inc. a private company looks a very strange move to me. If you are a good CEO, it doesn't matter if the company is public or private. Steve Jobs took an almost bankrupted Apple and made it again IT giant. The restructuring of Apple was much bigger that the expected restructuring of Dell. And the redirection of the business model was even more rapid. So in fact the ownership and shareholders does not obstruct you to do a good business. In fact in current corporate structure in large corporations in US, the influence of shareholders is very limited in favor of the board. So turning Dell private is a very strange decision.

But something else is more strange. That is the idea of converting Dell to a company that delivers corporate IT services and go out of PC business. I.e. to repeat the IBM model.

I think this is a mistake. The IBM model was conditionally successful. But IBM was first and with less competition. If started in this way, Dell will have to advance in a harder competition. Here is good to remember that IBM has made the migration while being public.

Anyway even now when IBM stays stable and has a good business, it is doubtful if the cancelling of PC business was a right move. The successor Lenovo is doing very well and is making profits. I.e. if IBM has kept the PC business it would have some more additional profit. The PC division does not make problems to other divisions.

My opinion is that losing PCs with IBM logo is an advertising loss for IBM. Even with a zero profit as money, and even with a small loss, the company would have a great advertising presence - on much desks and in millions of offices worldwide.

So if focused on corporate services, but keeping the PCs, may be IBM would profit better.

The same is the situation with Dell. This trade mark has become very successful and is good to be kept in offices. The existence of PCs with a "Dell" name on it will not only not damage, but will even help the rest of the business.

So I think Michael Dell is doing 2 mistakes at a time - converting the company to private and kicking out the PC business. The risk of this maneuvers to lead the company to a negative result is very high.

Dobri
Feb 2nd 2013

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