The word on the street late last week was that Michael Dell, Silver Lake Partners, and the banks behind them, who are trying to take the IT giant that bears the founder's name private through a leveraged buyout, were not going to raise their $24.4bn offer to counter a competing recapitalization plan put forth by Icahn …
The comparison with IBM...
is limping a little; even at its worst, IBM was still offering stuff that actually worked. My experience with Dell hardware for businesses is mixed, to put it very gently. Two companies I was working for swore never to buy anything by Dell again after having received pretty much what was ordered, but with several debilitating flaws, like the one server that was for some reason delivered with an optical drive that wouldn't work while the hard disk was on the same or the other IDE bus (OK, ancient history...), or the more recent server with space for 8 hard disks and dual RAID controllers, but for some reason equipped with only four power connectors for HDDs. And no, Dell could not deliver the required Y cables and told us that if we used 3rd party parts, all warranty was off.
Never had that sort of problem with IBM; they always found a way to solve such problems. Once, IBM service actually copied a PC I was having problems with component by component overnight to see whether they could replicate the trouble. They could. I had called them on a Saturday. Monday morning, I had a disc in the mail with the bugfix on it. And no, I was not at the time working for a big corporation. Imagine that happening with Dell? No bloody way.
Anyway, all that said, my point is that Dell have managed to pretty much burn themselves with a lot of potential customers. I doubt those will come back. IBM, 20 years ago, at least still had their old reputation for reliability and service. That's what saved their necks IMHO.
Re: The comparison with IBM...
I guess you never worked in IBM.
"Gerstner saw that the sum of the parts was worth more than the pieces, and held it together. And, if you want to be honest about it, Gerstner probably saw that IBM was a lot more screwed up on the inside than the outside world knew, and that breaking the company up and selling off bits would show that, so he pitched this idea of services as a new revenue stream, and it worked. After several years, IBM righted itself and Wall Street forgave Big Blue, even as its overall role in the systems business has been diminished."
All I can say is that SNAFU and nothing has really changed.
IBM is a bloated borg like carcass that is slowly dying and within 2 years, will have a new CEO (from the outside) and that person will have one hell of a job on their hands trying to repeat Lou's legacy.
Yes, IBM pulled off a public turnaround, but that was eons ago on the timescale that stock markets use. The vultures (Ichan et al) are far too prevalent, the market too risk averse and trading happens too fast based on best guess sentimental algorithims to tolerate a public turnaround now. Any hiccup and people run for the exits. The days of expecting investors to invest beyond the short term are gone and I don't foresee them returning for a long time.
Re: The days of expecting investors to invest beyond the short term are gone
I'm not sure the long term investors are gone gone. I suspect they are still there. They certainly are swamped by the trading algorithms of the short term feeders. I also suspect that to the extent they are in the markets, they are more likely invested in companies like IBM than Dell.
So I arrive at basically the same conclusion as you and others about the prospects for Dell the company: highest probability of its future existence is with Dell the man. Whether this is the most profitable route for current shareholders is a different question, but at best the odds of getting more money with Karl are 50/50 and only on the initial buyout. If you miss the initial buyout the risk of getting a hell of a lot less than Dell the man is offering are 80/20. If you're a current shareholder the question then becomes: Are you better connected than Ichan?
Carl Ichan actually RUN Dell?
I have strong doubts about that. He will appoint some token underling to oversee the breakup of the company.
I note that the local paper observes that Intel is having "problems" with what it is doing. They noted that the high margin (X86 type chips) aren't being used much any more, and the low margin chips they haven't accommodated. If they do invest in the low margin chips used in tablets, it will take them lots of time (and chips sold) to make money. With volume in X86 type chips falling, it is a big problem.
Dell might be in a similar position but with finished systems, not chips. It all makes for interesting times.
Can we please stop using bollocks expressions
I can just imagine the BOFH's take on that
Re: Can we please stop using bollocks expressions
Brilliant, that made me crack a smile... Simon should definitely based the next one on this.
"It will be interesting to see how much stomach corporate raider Carl Icahn really has to run Dell. ®"
He has no intention to run it. He will cash out as soon as he can. More of a case of seeing how soon he will do that if his st^H^Hdeal ends up chosen.
It's a bit harsh to say they missed the tablet market. Beside Apple was there a market? Dell tried valiantly with Streak but so did many others. Really, it's an iPad market with some other trying to copy.
Its also a bit harsh on the mobile side. Most phones are bought from the telcos along with a contract. Dell is not a telco. Which other PC vendors have a thriving mobile business?
Yes, they've missed the 'cloud computing' though they have an offering. But besides Amazon, who is making a return on their cloud investments? Microsoft? Google? Oracle? No one. This is a market made by Amazon. They have a good understanding of the needs of their customers just like Apple has a good understanding of theirs.
Privately, Dell can do lots to transform the copy but not if the game is me too.
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