New Dell Ad Emphasizes the Company's Startup Roots

As we look at 2014, Dell is now the only major OEM that is a privately owned company.  Dell was a publically traded company for 25 years, its IPO was in 1988, a mere two years after Microsoft’s own IPO.   The $24.4 billion buyout orchestrated by Michael Dell is the largest leveraged buyout backed by private equity since the 2007 financial crisis. It is also the largest technology buyout ever.  Michael Dell and Silver Lake Partners put together most of the money with the addition of a $2 billion loan from Microsoft.

The “new” private company has released an ad emphasizing its own startup roots:

http://www.youtube.com/watch?v=Ja61fxmY77Q

The ad also featured a number of companies that are important customers of Dell’s or Dell Ventures invested in including Amerijet, Gilt.com, The Knot, Overstock.com, Salesforce.com, Shazam, Shutterfly, TripAdvisor, and Zoosk.  It is quite common for large corporations to invest in small start-up and we have seen Microsoft, Google, Apple and others do this frequently.

I’m generally quite critical of the OEMs but in a few years I think we’ll look at Michael Dell as a genius.  The OEMs are just a the very beginning of a rough ride.  Increased competition, especially extremely cheap Android tablets, is going to kill the low end of the PC market.  We’ve talked about activist investor pressure towards Microsoft, but I think it will be nothing compared to the pressure coming down on HP, Acer, Asus, etc. as their profit margins start to shrink.  With Dell now a private company they have the freedom and flexibility other OEMs do not.  With the Dell Venue Pro 8, they look like they’re off to a good start.  The Surface is also another factor, especially with the acquisition of Nokia.  As Microsoft becomes more serious about hardware this will put a squeeze on the higher end of the PC market.  The OEMs have rode on Microsoft’s backs with almost no innovation for two decades.  With the exception of Sony & Samsung the other OEMs are not serious contenders in the mobile space which I think will be critical for long term success.  Hopefully as a private company we will see Dell put out some new phones.

It’s an interesting story of how Dell to being in the position it is today.  We may explore this in a future and much lengthier blog post.  But briefly, the story goes Michael Dell started the company in his dorm room at the University of Texas in Austin.  The company enjoyed massive success and exploded with the internet revolution in the mid-90s.  Michael Dell eventually became bored with the company and handed the reigns over in 2004.  Mr. Dell got into venture capital, quite successfully, and after that became a philanthropist.  He has donated many millions in Austin.  Many buildings named after Michael Dell in Austin.

The company itself has struggled since 2004 and Michael Dell finally came back as CEO in 2007.  Between 2010 to 2012 Dell made a number of acquisitions in the enterprise space, but this ultimately never returned enough profit to please Wall Street.  In some ways I think Michael Dell is concerned about his legacy.  He does not want to see the company fail and fade away, but instead pull a Steve Jobs and revive the company.  Only time will tell if he will be successful.

I predict we will see a major OEM fail this year and get sold off.