Word on the street is that Blackstone Group has a plan for turning around Dell: Buy the company, take it private, and install Mark Hurd as CEO. The thinking is that he’s available, has experience, and would have baggage keeping him from being the CEO of a public company.
I just see one glitch. Available != good fit.
Mark Hurd was ousted from HP due to a scandal, but that scandal overshadowed one other thing: His track record wasn’t all that good. He tried to turn HP into a software company, and his most notable hardware initiative in recent years was the failed HP Touchpad. He was successful earlier in the decade, but so was Dell during that same time period.
Then he went to Oracle, with the intent to turn around its hardware business, where he hasn’t exactly succeeded either.
The only place where Hurd’s track record differs significantly from Michael Dell’s–besides the scandal–is in cost-cutting. If Dell has significant redundancy, then Mark Hurd may be able to help, but there, the corporate history makes a difference. The HP that Mark Hurd inherited was a conglomeration of acquisitions–Compaq bought lots of companies, then merged with HP, so there was naturally some redundancy for him to find. But Dell doesn’t have as much history of buying up competitors as HP and Compaq had, and for most of its history, its hallmark was efficiency.
So the difference is that Michael Dell is good at building efficiency from scratch, while Mark Hurd is good at making something existing more efficient.
That really means Mark Hurd is probably a better fit where he is, at Oracle, than at Dell–assuming he hasn’t already eliminated the redundancies involved with Oracle taking over Sun.
Dell and HP both face a bigger problem: having to compete with their suppliers. Companies like Asus can design and build computers for themselves just as easily as they can build computers for Dell or HP, but if Asus sells the computers directly, they eliminate a middleman. What Dell and HP have to figure out is what value they’re adding to computers built in the Far East that just have their names stamped on them. That’s step 1. The alternate step 1 is to bring manufacturing back in house again, if they can do it competitively. Step 2 is communicating that value to consumers and businesses.
Apple found a way to do it–there is absolutely, positively no difference today between a Macintosh and a PC, at the hardware level. They use the same motherboards, built in the same factories, and put them in costlier cases. On the software level, they run a different operating system, which makes it easier to differentiate. Perhaps Dell and HP can learn something from the smartphone industry, where different smartphone makers use very similar hardware and the same operating system, but tweak it to try to make their experience better than the others. Notice I said better. That doesn’t mean loading a bunch of crapware that slows the system down and annoys users.
Dell has an opportunity now. It’s pretty much a foregone conclusion that they’re going private–the question is whether it’s Blackstone, founder Michael Dell and Silver Lake, or activist investor Carl Icahn who’s going to be calling the shots. As a private company, Dell will be able to think beyond the next quarterly report and make some brave decisions, even if the payoff might not take full effect for a few quarters.
Just rehashing the same old ideas isn’t going to do the trick, however. Because this year, they’re fighting off PCs made by their suppliers that are just as good, if not better because they don’t come bundled with all the crapware. The home PC business will be the first to fall if current trends continue. Business PCs will be next, because moving from home PCs to business PCs is a pretty easy step–just use higher-grade components and promise not to make any major changes to the motherboard for some set period of time, and build a sales force that’s used to dealing with business accounts. Finally, after business PCs fall to the commodity makers, they’ll go after the server business.
Asus can do this to Dell and HP because Dell did it to IBM. IBM couldn’t tell anyone what they brought to the table that Dell didn’t. So now Dell is trying to branch into other markets and be more like IBM, but IBM was in most of those markets before it was into PCs. Dell is better off trying to find a good answer to that question instead.