Wednesday, August 18, 2010

Dell: The Company and the Man

What is going on with Dell these days?

The owners of 378 million shares withheld their support from Michael Dell's re-election as chairman of the board of the company that bears his surname.

That reminds me of the brouhaha at Disney in the period 2003-2005.

But what is the "big picture" at Dell? My understanding is that its core business remains the sale of "the box," the physical computer you stick on top of your desk. It typically has Intel's chips, and MS software. Furthermore, since the selling of boxes is competitive, whereas both the software and the chip making markets have a single dominant firm each, most of the profit goes to Microtel. Dell's core business has a slim margin.

Accordingly, in recent years, Dell has tried to branch out into non-core areas where it might be less tightly squeezed. Last year, Dell bought Perot Systems, a provider of a wide range of IT services.

There's also this.

It seems to me that the missteps that led to investor dissatisfaction, and all those withheld votes, have to be understood in this context. Dell is changing course, and there will be some stumbling as a result of such a change. The right thing to do, nonetheless, is to persist.

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