Kavea Madhanagopal, TAPMI, Manipal
"Unless it cuts costs, going private is not going to save Dell"
The transition from 1988, when Michael Dell believed in the capitalistic principle of separating ownership and control, to 2013, when he maintains going private is better for long-term benefi ts, is a refl ection of Dell's incompetence. Why does it need a buy-out for the management to do what it takes?
Michael Dell, who argues against publicly held companies, made the decision to go private based on Dell Inc's short-term stock performance. What do you do when the public does not buy into your strategy of going the IBM way - moving away from low-priced PCs and concentrating on higher-margin services? Apparently, for Dell, it is, 'Blame the public and go private'. Is he hinting that privately held companies are more effi cient? Is the concept of investing society's capital in stocks and shares meaningless?
In fact, in Dell's case, the market was very much long-term focused, which is why the Dell stock fl oated at $13.50 in January 2013, higher than the predicted price of less than $12. Yes, public companies do have certain downsides because of their responsibilities to shareholders, but taking Dell private is only going to limit its options of acquiring companies for future expansions. Though Dell can buy some time by going private, that's all it can do. It needs steady cash fl ow to pay off all its debts and loans. Unless it cut costs, going private is not going to save Dell in the lacklustre PC and storage market.