* Has talked in past of taking company private
* Shares have lost half of value since he came back
* Investors want fresh ideas amid PC slump
By Ben Berkowitz
Jan 14 Michael Dell gave up day-to-day control
of the computer company that bears his name once, an experiment
that went poorly and ended relatively quickly - but he may be
willing to try it again in another bid to reverse the company's
Dell Inc is in talks with private-equity firms
about possibly going private, a source familiar with the matter
told Reuters, confirming a Bloomberg News report.
It was not clear how many firms might be involved, or how
much of the company Michael Dell might own after a deal,
relative to the 14 percent he controls now. It is also not a new
idea; he told an investor conference in June 2010 he had
considered it before.
But were he to pull the trigger, the billionaire's company
can focus on reversing its fortunes by focusing on higher margin
corporate IT and services - borrowing a page from IBM.
That's no small task for a company that built its name on
bespoke computers but whose star has waned, and now wants to go
up against larger rivals like Hewlett Packard and IBM.
"The company essentially has to re-make itself by
de-focusing on hardware and re-focusing on software and
services. This would give the company more time to effect this
turn-around," said Ashok Kumar, an analyst at Maxim Group.
But "the last tech buyout of a similar scope was Freescale,
which did not turn out so well."
Michael Dell started the company in 1984 out of his college
dorm room with $1,000, and led it to the top of the PC industry.
The TV ad slogan "Dude, you're getting a Dell" become one of the
best-known catchphrases of the early 2000s.
The company's early successes made him wealthy, enough to
start a firm called MSD Capital that employs 80 people in three
cities investing his money in everything from stocks to real
estate. Forbes ranks him among the world's 50 richest
billionaires, with an estimated fortune of nearly $16 billion.
But much of his success is still tied to the company he
founded, and from which he has not been able to step away.
The first time he handed over the reins was in 2004, when
long-time lieutenant Kevin Rollins took over as CEO. The company
was on top of its game when Rollins stepped in, but sales and
customer service slipped in the ensuing three years, and there
was a general sense of relief among investors when Dell
reasserted control in Jan. 2007.
"There's been no turnaround and the bottom line is Michael
was the one who built the company," Needham & Co analyst Charles
Wolf said at the time.
A STAR IS BORN
In the six years since Michael Dell resumed his leadership,
market share has dipped even further and so has the stock.
Dell, which derives more than half its revenue from sales of
plain-vanilla PCs and servers - has steadily ceded market share
to HP and Lenovo, and is struggling along with the
rest of the industry with declining PC demand.
Even with Monday's surge, Dell Inc shares are still down 49
percent from when he resumed leadership. (Though to be sure,
HP's stock has fallen further, down 58 percent).
During that time the market changed dramatically, and Dell's
once-iconic built-to-order PCs have lost favor as consumers and
even businesses move toward tablets and smartphones, a market
where Dell has taken tentative and unsuccessful steps.
That slide was magnified by Dell's brash confidence, which
sometimes got him in trouble with peers, most famously the late
Apple Inc CEO Steve Jobs.
When Jobs returned to lead the company he started in 1997,
Dell famously suggested he'd be best off shutting the company
down and returning the cash to shareholders.
Nine years later, Jobs had the last laugh when Apple's
market capitalization surpassed Dell's. Even with its recent
slide, Apple remains more than 20 times bigger than the former
PC industry darling.
Should Dell now choose to go private, much will hinge on the
willingness of future partners to support his potentially costly
"While there are reasons for Michael Dell to work with PE
investors to take the company private, the risks of executing on
its transition strategy could go up in such a scenario unless
the PE investors are open to continue injecting capital to
support the company's strategic goals," Mizuho Securities
analyst Abhey Lamba wrote on Monday.