Unless you’ve been living under a very cozy rock for the last couple of weeks, you’ve heard that Michael Dell jumped in and bought his company back with the help of Microsoft and Silver Lake Capital. There’s more than a fair amount of buzz surrounding this leveraged buyout. What is Michael planning on doing with his company? Why did he suddenly want to take it private? What stake does Microsoft play in all of this? I think Michael Dell felt it was time to hit the home gym, so to speak.
There’s usually a large influx of people into health clubs and gymnasiums around the first of the year. These people made a resolution to get fit and decided to go out to do it. They probably wanted to get out of the house after being cooped up during the holidays. Maybe they wanted to go somewhere with a treadmill or a weight bench. Perhaps they felt the only way that they could get fit was by being around other people that motivated them to get things done. They all have their reasons. There does exist a subset of the population that doesn’t go to the gym for various reasons. In this case, I’m focusing on those that don’t like having the spotlight shined on them. They either are afraid that they’ll look foolish in public just starting out with a workout program or they’re scared that others will judge them for their form or exercise choices. They’d rather apply the work using a personalized workout program or spend the money to buy some of the equipment and setup their own gym in their garage. They may work twice as hard in the comfort and protection of their own home to get fit. These are the kinds of people that you don’t see for six or seven months only to run into them one day and say “Wow! Look at you!”
To extend this metaphor to the market, Dell is in need of shaping up. Whether they’ve acquired too many companies or their margins are getting slammed by the shift away from PCs, the fact is that Michael Dell has decided to make some changes. However, he doesn’t want that to happen in the public health club, or stock market in this case. Every action will be scrutinized. Every decision will be debated by investors and talking heads on CNBC and CNN. They will deride Dell for strategy mistakes and wonder why they made the decisions they did. Doubt and uncertainty of direction will squeeze the life from Michael Dell’s baby. If you don’t believe something like that could happen, why don’t you ask Meg Whitman what she thinks about the market right now?
Dell has decided to buy some home gym equipment and get fit in the privacy and comfort of their own home. This isn’t a cheap solution by any stretch of the imagination. Michael Dell put up a lot of his own money. He’s borrowed from others and put his reputation and livelyhood on the line. He’s done this because he feels that he knows how to get fit. He doesn’t need the gym rats sitting around critiquing his form and telling him he needs to do more squats. He wants to take the time to concentrate on the “exercises” he feels are most important in order to come out looking like he wants. Maybe that involves staff reductions or spin offs. At this point, no one really knows. What can be certain is that no one will know until Dell wants them to know. No investor speculation or outside interference will drive Michael Dell to do something he doesn’t want to do. Better still, those same dynamics won’t have an opportunity to force him out like the CEO of Chesapeake Energy or the last two CEOs of HP. He’s only going to quit this new fitness regimen when he decides he’s done. As for the Microsoft question? They basically provided a treadmill for Dell’s home gym with their investment. That way, no matter what else Michael Dell decides to work out with, Microsoft is sure he’ll be running on their treadmill for his workouts.
You can’t help but applaud Michael Dell for wanting to fix things. He’s certainly started a firestorm among his current investors, but I think he genuinely believes he can right the ship here. Granted, he’s known as a very private person. That means he doesn’t want to air his business in public if he can help it. That, to me, is the driving motivation behind the buyout. He wants to fix things privately and come back out on the other side a stronger, better company. He wants people to say “Wow!” when he’s finished and compliment him on his new physique. Once he’s put in all the hard work, I can assure you that you’ll see more of Dell’s new look in public.