The Monday after the end of the NFL season is traditionally known as “Black Monday” due to the number of coaches that are relieved of their duties because of poor results on the field (as of this writing 6 have reportedly been fired with more pink slips possibly to come). This unfortunate day for these coaches and coaching staffs raises the question, which CEO should succumb to their lack of results and be relieved of their duties? After careful discussion and deliberation, the answer seems to be clear: Michael Dell must fire himself to give Dell Inc. (DELL) any shot of restoring its glory in the future.
The idea of a Founder, Chairman, and CEO firing himself might seem bizarre. After all, every person has some bit of pride that makes letting go of control of a company that they built difficult. However, sometimes when you love something so much you need to step away and let it flourish on its own. Letting new blood with fresh ideas come in and take the reigns of the company with your name on it could bring it to prominence once again (if at all possible).
Michael Dell founded his computer company in 1984 when he was just a student at the University of Texas. Over the next twenty years Dell brought his built-to-order computer company to extraordinary highs, with the stock of his company reaching an all-time high in 2000 at $56.44. Around this time Dell’s marketability was excellent as well with the country familiar with its “Dude, you’re gettin’ a Dell” marketing campaign. Things were going so well for Dell Inc. that in 2004 Michael Dell decided to step down as CEO and handed the reigns to Kevin Rollins.
However, this is when the problems with Dell started to be evident. The company started to loosen it ties with Microsoft (MSFT) and Intel (INTC), two software companies that greatly contributed to Dell’s ascension to the top of the PC market. Over the next few years Dell constantly missed earnings expectations and experienced little sales growth. The problems started to mount that the board suggested the Michael take over as CEO once again. So in 2007 Dell took over as CEO once again to try and right the ship.
The problem though is that since Michael Dell stepped back on to the scene, Dell has seen a tremendous loss in market share and stock price. Michael has not been able to turn around the company that he built as a 19 year old in Texas. Shares of Dell have dropped -57.71% since January 31, 2007 when Dell took over. Dell has had a problem keeping up to date with the market and staying relevant over the past decade. As the technology sector has moved away from stand alone desktop PCs, Dell has struggled to develop new technologies in the mobile smartphone and tablet markets. Also, the company has been too focused on its hardware with about two-thirds of revenues coming from PC business. As a result Dell continually pays high prices for software and storage companies and services and it has faced the consequences of overall PC market downturn.
Over the past year Dell has made various acquisitions of software and storage companies in the order to amend the issues of their lack of strength in these sectors. However, it seems like these moves may be too little too late. In the volatile technology sector, it might be that Dell’s time as a big-time player might be up if their current leadership continues a path of stale product innovation with little to no vision for the future. It might take fresh eyes and a fresh face to steer Dell back to prominence once again.
The Bottom Line
Michael Dell needs to fire himself and step away from the company that he built in order for it to last into the future. This year alone Dell stock is down -31.41%. A company that was once easily recognizable and trendy is now left as a second-class player in its own industry. Now that it is established that new leadership is needed to give Dell a chance at a prosperous future, the new question is whether a prosperous future is at all possible. Well, Michael Dell needs to fire himself first before the answer of this question can be answered.
Dell Inc. (DELL) is not recommended at this time, holding a Dividend.com DARS™ Rating of 3.2 out of 5 stars.
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