Oct 13, 2015

How will going private benefit Dell?

I was surprised to hear the news that Dell was going to become a private company. It’s pretty unusual for a company the size of Dell to be privately held instead of publicly held, and I would think that it would make it more difficult to raise capital. How will this impact the way Dell does business, and will customers see any changes?
The greatest benefit will be freeing the company from being restrained by Wall Street's absurd focus on short term performance. This forces companies to pay disproportionate attention to performance on a quarterly basis, often at the expense of long term results. Very few companies have been able to free themselves of these shackles - Amazon is one of the few that seems to be able to fully implement a long term strategy without being penalized by falling stock prices when profits even slightly miss projections.

With the current trends in compensation resulting in corporate officers receiving large amounts of company stock, this problem is made even worse. Imagine the challenge of taking the long view when the result is that it could cost you millions of dollars in the value of your stock because it doesn't show up as profit in a 3 month window. That's apparently a tough pill to swallow for many CEOs and other corporate officers.
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