Dell Considered Taking Company Private

Michael Dell has revealed that at one time considered taking his namesake company private, though in the same interview he reiterated that he is committed to continuing to run the world’s third largest PC vendor.

Dell made his comment June 3 during a Sanford C. Bernstein & Co. conference in New York. Sanford Bernstein analyst Toni Sacconaghi had asked him if he had ever considered taking the company private, and Dell said, “Yes.”

He didn’t elaborate on his thinking behind the idea, but did say later during the interview that he is “committed to continuing to run the business for a long period of time,” according to several reports.

Taking the company private didn’t seem to have been more than a passing thought, but Dell’s brief comment sent shares of his company down more than 6 percent at one point June 3.

Analysts didn’t give the comment much weight, saying CEOs occasionally will entertain such thoughts. In addition, with a company the size of Dell, taking it private would mean not only investing a lot of his personal fortune, but also finding a strong party of investors to do likewise, according to several analysts.

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Roger Kay, an analyst with Endpoint Technologies Associates, said Dell in the past has been strategic in diversifying his investments over the years, and the thought of him taking the bulk of his wealth and investing it in a single company-even his own-seems unlikely.

Instead, Dell’s response to Sacconaghi’s question more likely illustrates his frustration with investment firms’ focus on short-term profits over long-term planning.

“He’s always been kind of annoyed with Wall Street pressuring managers to make short-term decisions to boost profits,” Kay said in an interview, adding that Dell believes companies that take a longer view tend to get punished by the investment firms. “I think what he was doing was being more candid than usual. He was expressing a kind of ‘I’m not a Wall Street kind of guy’ thought.”

It’s the long-term future that Dell is keeping his eyes on. Dell stepped down as CEO in 2004, but returned three years later, and has worked to reduce the company’s costs while expanding the business beyond the core PCs.

Dell, which at one time was the world’s top PC maker, is now No. 3, behind Hewlett-Packard and Acer. Company executives are looking to such areas as enterprise services to help create a more solutions-focused Dell. At the same time, Dell is trying to muscle deeper into the consumer space with such devices as the new Streak small tablet and the Google Android-based Aero smartphone.

Endpoint’s Kay said given the rule of thumb that such business transformations take about two years, the fact that Dell is in year three isn’t a good thing. The company was hit by the worldwide recession, he said, but so were others, including rivals Dell and IBM.

There are signs of improvement, though. Dell has increased the percentage consumer products make up of the overall business, Kay said. Currently about a third of Dell’s business is consumer, about double what it used to be.

Dell has also been aggressive in expanding its services business, as illustrated by its $3.9 billion acquisition of Perot Systems in 2009.

In addition, there’s the expectation that business spending on IT-which has lagged behind consumer spending-could start coming on strong in the second half of the year, which would give Dell a boost.

“[Dell is] commercially focused and its commercial business has begun to increase,” Kay said.