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Dell Needs to Cough Up a Dividend

Michael Goodman

SAN FRANCISCO -- As Dell(DELL Quote) shares retreat Friday amid a sea of tech-stock red, shareholders could begin to wonder what it will take to get significant value out of the company -- short of having their own sweet executive sendoff package, that is.

In a Securities and Exchange Commission filing Friday, the computer maker announced that Michael Cannon, its president of global operations, would be leaving the company on Jan. 31 but staying on for two years as a consultant. Cannon will be paid $10 million in cash under the severance agreement, with an additional $1.5 million coming his way for the consultancy gig.

In addition, Dell said Chief Marketing Officer Mark Jarvis also will exit later this month, taking with him the standard severance payout of a year's worth of base salary (Yahoo! Finance listed this as $606,000) and his target bonus.

OK, we're all capitalist adults here. It's no earth-shattering revelation that executives at major public companies receive more compensation in a year than most workers in the world will earn in their lifetime.

And, truth be told, we're evidently fine with that -- it's the cost of doing business, and don't we all want the companies in our portfolio to seek out the best available talent at whatever the going rate happens to be?

On the other hand, the payouts make it a touch more troubling that longtime Dell shareholders, who have experienced the stock performance illustrated below over the past five years, have been left to settle into wait-for-turnaround mode.

DELL (DELL) Marketwatch.com

Of course, if Dell wanted to, it could start paying investors for that wait by instituting a dividend. Considering the company's cash holdings of $8.5 billion and what appears to be ahead for its growth prospects, it might be time.

Interestingly, a Houston Chronicle story from 2006 quoted one longtime investor who said company founder and CEO Michael Dell had told her the company would consider a dividend if it ever transformed into a "value company."

Presumably, that means admitting you're no longer a growth company. Well, how do we put this? Expected fiscal 2009 revenue growth of 2.1% really isn't growth. Expectations for fiscal 2010 revenue (assuming they're not still too high) to fall 7% really isn't growth.

As we know by now, more than half of Dell's revenue still comes from the U.S., and the trends in job-shedding this year don't inspire much confidence for pickups in demand from the company's corporate or consumer customers.

Let's also not forget the warning earlier this week from Intel(INTC Quote) that saw the chipmaker lopping off a half-billion dollars in its quarterly revenue forecast due to the stagnancy in global PC demand.

Patience may ultimately (someday) be rewarded by Dell's turnaround strategy, and the company seems keen on cutting costs (sorry about that, Ireland) as the business cycle heads further lower.

In the meantime, however, investors may increasingly consider whether some of that $8.5 billion would do more good in their hands than it will in Dell's.

Dell shares ended Friday's trading session down 1.3% to $11.12.