Dell's Private Little Company Is Crazy... Like A Fox

Charles Foster Kane dreamed of Rosebud; Michael Dell yearned for his old company back. Yesterday, one of them got his wish, when it was announced that Dell Inc. shareholders would be returning the company to Dell's ownership on Nov. 1.

Seven months, $25 billion and dealing with Carl Ichan may seem like a lot to pay for a company that primarily makes PCs in a market that is seeing a dwindling of PC sales—especially the Icahn part—but by convincing Dell's shareholders to sell their stock back to him and his investor partner Silver Lake Partners, Dell may have done the best thing to keep his company alive.

That may not seem readily apparent if you listened to Dell CFO Brian Gladden's remarks in yesterday's call announcing the news. Gladden stated that Dell Inc. would pretty much stay the course, start to invest more heavily in enterprise software and services, such as cloud computing, and keep on making PCs and "other end-user computing devices"—what we call tablets.

On first pass, it sounds like Dell Inc. wants to become more like competitors Hewlett-Packard and IBM (though the latter sent its desktop business off to China's Lenovo years ago). Which sounds a little nuts. Even if you put aside the heavy competition that these companies will bring to Dell (and, really, you can't), Dell is focusing on a sector that is at best in flux right now, as consumerization of enterprise IT continues apace, and at worst in some peril, as trust issues regarding cloud computing are still being sorted out by companies in the wake of the NSA leaks.

But on further review, it may be that Dell is in the best shape moving forward precisely because of those potential hurdles.

The truth is, selling to the enterprise is no longer an easy game of checking off an order with "how many servers do you need?" and "You want desktops with that order?" IT is changing at a deep fundamental level, and IT administrators in the enterprise (and nearly every size of business, for that matter) are trying to figure out what to do.

Because of that uncertainty, you see software and hardware companies forced to adjust to market conditions at a pace that some would consider break-neck at times. That's because, as mostly public companies, they must do everything they can to make money or stem the flow of losing money.

Public companies, because of their responsibilities to their shareholders, can only afford to take a certain amount of risk before they have to cut their losses and move on to another plan. This is why we see drastic moves like Microsoft becoming a "devices and services" company and more subtle moves like Google's infamous Fall and Spring cleanings to axe cloud services that people might love but aren't making the company any money.

But, as a private company, Dell may very well be in a position to take those risks and stick with them. Here's one hypothetical: if everyone in the hardware market wants to put their eggs in the tablet basket (Dell included), they can, but if tablets somehow fail in the enterprise sector, then the public companies would likely drop their tablet products like hot potatoes. Dell, in theory, could stay the course, slowly and steadily filling orders for businesses that can make business use of the tablets, and innovating their tablet line to something that gets it right.

This example might play out, because for public companies, the definition of failure is usually "it's not making us truckloads of money right now." Public companies have less patience, because their shareholders do. A private company could take the risk and go for the longer play.

It may not be in tablets; it might be in PCs. In fact, I think ultimately PCs will be a good run for Dell Inc., as I remain convinced there will be a bottom to this PC decline, if only because some people have to get some work done. In their quests to bringing in the bucks, Dell's competition might let their PC efforts slide, leaving more chances for Dell to capture more of a market that will never truly evaporate.

Whatever it is, Dell should be able to take its time and figure it out.

Is going private the be-all-end-all for Dell Inc.? No, because they could still make bonehead moves and drive themselves into the ground. But with more time and freedom to plan, they may have a better shot to react to this IT market than their competition.