Michael Dell Finally Gets His Wish: Back to Privately Held

Let IT history note that on Sept. 12, 2013, Michael Dell regained control of the namesake company he started in his University of Texas dorm room with $1,000 29 years ago, after persuading 65 percent of Dell shareholders to sell their stock back to him and his key investor, Silver Lake Partners.

As the result of the preliminary vote, Dell Inc. will return Nov. 1 to doing business as a privately held enterprise after a $25 billion buyout. The company had been publicly traded on NASDAQ since its initial stock offering on June 22, 1988.

Michael Dell's effort to make his company more agile and free from quarterly scrutinies in a time of receding personal computer and server sales was a Herculean task by anybody's standards. The Sept. 12 vote ended a lengthy and often bitter contest to take the PC and general-purpose IT provider private; Dell had first announced his intentions in February 2013 to take over the company in a $24.4 billion buyout.

'Energized to Continue Building Dell'

"I am pleased with this outcome and am energized to continue building Dell into the industry's leading provider of scalable, end-to-end technology solutions," Dell said afterward in a conference call to analysts and journalists. "As a private enterprise, with a strong private-equity partner, we'll serve our customers with a single-minded purpose and drive the innovations that will help them achieve their goals."

Dell's board of directors had delayed the vote three times over the summer as large-scale investors Carl Icahn, T. Rowe Price and others pressured Dell to keep the company public. But an improved bid to $13.75 per share and an earnest request to the board by Dell and Silver Lake resulted in a new set of rules that counted only votes cast. Previously, a no-show shareholder was counted as a "no" in the voting rules.

Dell's stock was flat at $13.86 on Sept. 12.

In an answer to a question about what Dell will look like as a restructured, privately held company, Dell CFO Brian Gladden said, "We see the value of the broad portfolio and we'll continue to take a leadership role in the PC business and end-user computing devices. We think that's an important part of the portfolio; it's not a part of the business we're trying to shrink.

Gaining Market Share in PC Business

"We've gained [market]share sequentially year over year in that market; we continue to make large investments in R&D and sales capacity around the enterprise solutions and services business," Gladden said. "What we've seen over the last three to four years is that part of the market is growing faster, we've made investments that have accelerated our growth—in some areas faster than the market—and we think that will grow to be a bigger share of the business."

With PC sales in a two-year slump and increasing competition from the smartphone and tablet PC markets—neither of which shows Dell as a major player—where does Dell expect new sales growth to emanate?

"Look, we play in a $3 trillion industry [the IT industry as a whole]," Gladden said. "There's really no competitor that has more than 3 percent of that $3 trillion. We all expect that there will continue to be growth in that space.

"IT spending is going to continue to grow; the breadth of our portfolio—it's obviously more than PCs now. Exposure to the data center, to the key trends that are driving IT spending today—like the cloud, like virtualization—and the items we bring to the market give us a chance to get more than our fair share of the $3 trillion market opportunity," Gladden said.

'Roadkill' to Other Competitors?

Asked a pointed question why Dell won't eventually become "roadkill" to other companies such as Microsoft, IBM and Hewlett-Packard, because those publicly traded companies are much larger, produce many of the same products and can tap equity from the public markets, Gladden said, "Our strategies are a bit differentiated.

"In many ways what we've built over the years looks like competitors' offerings, but it is very focused on scalable, open technologies, faster time to value for customers, and ultimately well-positioned with a large base of midmarket customers who value what we bring," Gladden said. "I think that's differentiated; we hear that from customers. That's not to say we don't scale up into large accounts and can't serve down to consumers and BYOD or other parts of our business.

"Practical innovation, being efficient and affordable, and building on the direct relationships we have. Which is very different from what our competitors do."

On Sept. 9, activist investor Icahn gave up his long-shot bid to derail Michael Dell's $25 billion proposal to buy back the world's third-largest PC maker, though not without taking a few swipes at the CEO and the company's board on the way out.

Icahn ended up getting what he wanted, however, helping force up the stock price after buying more than $1 billion worth and becoming Dell's second-largest investor for a short time.