Michael Dell Tries Again To Justify His $24.4 Billion Plan to Buy Back his Company

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Cregan89

What enterprise in their right mind would purchase Dell hardware? If Dell can't design and build reliable consumer hardware, how can they possibly build reliable enterprise hardware?

Not to mention the huge market shift towards cloud computing. Enterprise hardware is on it's way out in favour of massive data centers, and these data centers are built with high quality custom servers, not Dell branded jokes.

There are plenty of consumer hardware companies who are doing incredibly well. Dell simply got out-innovated and out-engineered. That's the price you pay for building poorly designed products. They lost the consumer market, and you can be guaranteed the exact same thing will happen in the enterprise market as well. If I were a shareholder of Dell, I'd be getting the hell out of there as quick as I could.

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bjoswald

From what I understand, this guy can't make up his mind. As soon as the PC market slowed down, he threw up his hands and said "I'm out". Now that other companies have identified possible avenues for success, he wants to come back into the fold and sit in the driver's seat again. You can't have it both ways, Mike.

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John Pombrio

Everyone is trying emulate IBM who successfully transitioned away for the low margin divisions to ones with high margin and high value added. Not a bad role model at that.

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PhaQue

All the romantic notions of yesteryear are irrelevant. Greed is good. It always has been. It always will be.

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John Pombrio

I hate shareholders. They could give a damn about the company or its finances. All they want is to have the stock prices to go up or the dividends to get bigger. So what if the company suffers loss of business or skilled engineers or valued customers?
It was not always this way. The huge growth of the DOW in the 1990's and in 2007 and just recently completely disconnected the price of stocks from the company's underlying business fundamentals. Now it is just investor's perception of the bling that the company extrudes rather than the day to day running of the company. Look at the share prices for Apple and Google to see this in action. Was Apple really the most valuable company in the United States?

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Scatter

Agreed. A company can have record sales one year yet shareholders expect it to happen again year after year. There is a ceiling people.

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Renegade Knight

I'm a shareholder. I dislike CEO types who treat a company like their own private bitch and thereby fail the shareholder and the employees.

The Dell argument goes like this. "I am fully unable to do my job as CEO and figure out how to survive and thrive in the current market, but if I can buy the company as the CEO I really can figure out how to survive and thrive in the current market." In other words. He needs fired by the shareolders he's bilking.

That you hate shareholders just shows that you have entirly too much faith in how much power we have.

Your theory about stock value isn't actually wrong. However where the heck are we going to put our money? We all have limited options. Stocks, Bonds, Savings, Real Estate, Gold...after that the pickings are slim and a lot of those suck right now. For what it's worth if you have a retirement plan, 401k etc. You are a sharholder even if you don't get to vote your shares.

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John Pombrio

I agree with the "rock star" CEOs. Having worked for HP, I was dismayed to have Carly Fiorina jump into the company and try her hardest to get rid of the managers who actually knew what they were doing. Her talk to the Compaq CEO on an airplane flight led to one of the worst purchases in HP's history. If Bill Hewlett or David Packard were still alive, she would have never gotten away with her excesses (or been hired). Walter Hewlett, Bill's son, fought the Compaq deal tooth and nail. It has only gotten worse since then with Leo Apotheker being the nadir.

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Hey.That_Dude

While I like investments returning profits, there is a point where investors have overly high expectations. These expectations push a company beyond health boundries. They cut positions after working people to the bones just to "appear" to come out on high margins. It's all a bunch of crap. NOW, if investor were required to KEEP their investments for a short period of time -say a year- then business could focus on good business practices and long lasting expansion, along with creativity and other things. This, all the while giving investors a profit on their investments, looks like a much healthier relationship than the current system.
-Honestly, people do this with banks all the time.-

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Renegade Knight

I remember arguing with realtors before the crash saying. "Look, we average folks have to be able to afford this stuff. If we can't, this run up is not sustainable." The realtors argued back.

They have a word for investors with overly high expectations. Chumps...er Victims.

Business should always focus on good business practices. Shareholders are NOT the problem. We have little power unless we own enough to throw our weight around.

Wall Street on the other hand is a major problem. They invented the short term.

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tgr5m

I think that you are both have a point, the real problem is that publicly owned companies are so beholden to their quarterly forecasts that they can't reposition easily for the long-term. That's Dell's problem right now. They are a big player in a market that is declining. Eventually, they will go away, however, they are locked in by attempting to return value for the shareholders.

It virtually ensures that they will see slow decline over the next XXX years as they try to hold up their margin and volume by cutting to the bone. It makes sense for them to go private, take a few bad years, and change their strategy to match up with where they think computing is actually going to be in 10 years. If they did that while public, the board of directors would likely lose their jobs.

Additionally, Icahn's proposal is sheer madness. He recommends taking a boatload of debt into a company that has run into some problems, and just giving away $14/share. Surely that benefits him (and other short-term shareholders), but will likely cripple the company in the future.

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Renegade Knight

They aren't locked in to anything. All Dell needs to do is come up with a long term strategy and monitor it. That's his job.

If he was thinking about the long term. Dell PDA's (which were good) would have morphed into smart phones which would have morphed into a thriving Android/Win Phone business rivaling Motorola (not hard these days) and Samsung. They pulled the plug not realizing that PDA though dead actually started the mobile computing trends.

Short term thinking (and classic Wall Street Thinking) leads to destroyed stock values. Crappy long term prospects and dismal returns on investment over time. But man does it ever pump up any 1 CEO's stock options.

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vrmlbasic

I don't like self-loathing so I can't hate shareholders.

I do however despise what I'll call the "low information" stock traders, the buffoons who, as you say, are jumping at whatever company is perceived as pumping out the best "bling".

These are the people who have no patience and can't be persuaded to see the logic in "if we spend money now, take a hit today, we can reap it in big tomorrow", to the detriment of companies everywhere.

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