One year ago, Michael Dell and Silver Lake Partners successfully took the PC maker from a publicly-held entity to a private company in a $24.8 billion private equity buyout after seven months of largely public warfare with activist investors Carl Icahn and Southeastern Asset Management.
Now, in an open letter published in the Wall Street Journal, Michael Dell wrote that the ensuing period has proven that Dell-- which now discloses its quarterly financial results privately to current holders of its debt securities and potential institutional debt investors--made the right move. The vendor’s next private quarterly earnings disclosure is slated for December 4.
While skirting the dollars and cents specifics, Dell wrote, "I’d say we got it right. Privatization has unleashed the passion of our team members who have the freedom to focus first on innovating for customers in a way that was not always possible when striving to meet the quarterly demands of Wall Street.”
What, ultimately, drove Dell’s move to end the company’s publicly-traded 25-year run and turn it private? In a word, the myopia required to produce escalating earnings for shareholders.
“The single most important thing a company can do is invest and innovate to help customers succeed,” Dell wrote.
“Yet we find ourselves in a world increasingly afflicted with myopia—governments that can’t see beyond the next election, an education system that can’t see beyond the next round of standardized tests, and public financial markets that can’t see beyond the next trade,” he said. “This was what Dell faced as a public company. Shareholders increasingly demanded short-term results to drive returns; innovation and investment too often suffered as a result. Shareholder and customer interests decoupled.”
In essence, what Dell is arguing is he wanted to move the company toward the cloud and data analytics but was hamstrung by financial factors governing publicly-held companies.
“As a private company, Dell now has the freedom to take a long-term view,” he said. “No more pulling R&D and growth investments to make in-quarter numbers. No more having a small group of vocal investors hijack the public perception of our strategy while we’re fully focused on building for the future. No more trade-offs between what’s best for a short-term return and what’s best for the long-term success of our customers.”
Dell apparently couldn’t resist taking a swipe at rivals IBM (IBM) and Hewlett-Packard (HPQ), contending the former’s divestitures and the latter’s impending split into two companies run counter to technological innovation.
“Major players like IBM and Hewlett-Packard are selling off and splitting up—huge disruption at a time when long-term innovation and customer focus have never been more critical,” he wrote. “Such moves may boost share values in the short term, but too often at the expense of real innovation.”