Michael Dell's tough road ahead

Arranging a $24.4 billion buyout of his company is the easy part. There's also a declining PC industry and a fiercely competitive device market to contend with.

By Jonathan Berr Feb 5, 2013 5:07PM
Michael Dell, Chairman and CEO of Dell Inc., in October 2012 (Lucas Jackson/Reuters)When Michael Dell returned as CEO of the technological company he founded in 2007, The New York Times reported that he was excited to face the challenges ahead. Less than a decade later, the company's continued struggles have led him to take Dell (DELL) private in a $24 billion deal, the largest since 2007.

As head of a private company, Michael Dell will have the opportunity to tinker with his business model away from the prying eyes of Wall Street. Success, though, is not a given. The Round Rock, Texas, company was built on the personal computer, a business that has been eroding for years. 

To make matters worse, Dell has been unable to regain the top spot in the PC market that it lost in 2006 to Hewlett-Packard (HPQ). In fact, as Engadget noted, Dell's position continues to worsen. Dell held 10.5% of the market in the third quarter, trailing Lenovo and HP.

Unfortunately, PCs still account for about half of Dell's business, and the company's efforts to expand its offerings have not gone well. For instance, Dell's Streak 7 tablet generated few sales and got awful reviews. Dell quit the smartphone business last year after lackluster results. The company's customer service problems have also been well documented by the press for years.

Michael Dell has joined forces with Silver Lake Management to take the company private. He's going to contribute his 14% stake in Dell toward the deal along with additional cash, according to news reports. In the press release announcing the deal, he said, "I believe this transaction will open an exciting new chapter for Dell, our customers and team members."

Sounds familiar, no?

HP reportedly is mocking Dell's plan, arguing that it creates uncertainty for its customers. But HP is in the same boat as Dell in many ways, and CEO Meg Whitman may one day have to follow her rival out of the public markets.

--Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter @jdberr.


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3Comments
Feb 6, 2013 8:29AM
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after dealing with dell two different times with two different items i will never deal with this company again! i ordered two lap tops and two of their itunes or what ever they call their music dodads for my kids. when i ordered them i talked to some little girl in arizona after that forget it every call i made to them went to some person i could not understand. took 6 months to get issues resolved. im surprised they are still in buisness.
Feb 5, 2013 7:32PM
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It's amazing to think about the differences between a company like Dell and one like Apple.  Both started as desktop computer companies, but that's where the similarities end.  I remember when you had to wait on the phone for 20 to 30 minutes just to speak to someone about ordering a Dell computer.  As the years went by you had to spend 20 to 30 minutes waiting for a guy in India to explain how to fix your Dell.  Now those computers sit on the shelves of Costco and Sam's Club like dinosaurs collecting dust.  Today, no one wants a desktop and Dell has proven that can't build a tablet or a smart phone.  Doesn't look good Mr. Dell.
Feb 7, 2013 12:15AM
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I have owned two laptops, both of them are crap. Same problems other people were having and of course Dell doesn't want to owe up anything. Michael Dell your company sucks, your products suck, your India customer service sucks. I will never buy another product from your company ever. I tell all my friends about your crappy products. Go out of Business jackass.
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