Unfortunately, Dell Is Staying the Course

NEW YORK (TheStreet) -- Michael Dell scored a victory to take Dell (DELL) private at a shareholder-approved price of $25 billion, so the company will soon to fade out of the spotlight.

The company, credited with perfecting the "built-to-order" personal computer business, will look for its "second act" in order to re-emerge as a legitimate tech power. But anyone believing Dell has learned anything over the past five years is sure to be disappointed.

Now, I do know it's not that uncommon for once-dominant tech companies to fail and then resuscitate themselves for a second chance at growth. Take, for instance, Apple ( AAPL), which was struggling to survive in a PC-dominated world led by Microsoft ( MSFT). Today, Apple is the largest technology company in the world.

However, unlike Apple, which executed its recovery by shedding unprofitable businesses and entering new markets, Michael Dell seems convinced the company's current plan, which has never worked, is still the best course to take.

Last week, while discussing the company's future in an appearance on CNBC's "Squawk on the Street," an excited Michael Dell stated, "We're really focused on our customers and building out end-to-end solutions."

Pardon my pessimism, but this is precisely the jargon that's been used in every Dell conference call over the past five years.

Among his five "strategic areas of focus," Michael Dell listed not only "enhancements in enterprise solutions" but plans to double down on the company's investments. What this means is Dell the company has every intention of throwing more good money after bad -- something that it has done consistently under Michael Dell.

Trying to "buy growth" with untimely acquisitions like Quest Software and SonicWall is precisely what has gotten the company into this mess. Not only have these acquisitions failed, but they focus on an eroding enterprise ideology instead of a growing mobile business. This speaks to the stubborn nature of management.

With no organic growth to speak of, the company needs to think differently. With Michael Dell declaring his company has no interest in the mobile phone business, I don't see how this company can be taken seriously as a worthwhile turnaround candidate. It's true that entering mobile phones would place Dell in the unenviable position of having to compete with both Apple and Google ( GOOG). On some levels, this recognition deserves credit, as cowardly as it may be.

However, I believe that all it would take is a strategic acquisition such as BlackBerry ( BBRY), which Dell can own today for pennies on the dollar, to suddenly give Dell fourth place in device market share. This was precisely Microsoft's thought process when it recently picked off Nokia's ( NOK) phone business.

Meanwhile, when was asked about Dell's position in a brutal PC market, where the company trails both Hewlett-Packard ( HPQ) and Lenovo ( LNVGY) in global sales, Michael Dell responded by saying, "We are the only ones that are growing scale, at least for the moment."

But "growing scale" -- however that is measured -- in a chronically shrinking market can only last for so long. Absent additional details to what he describes as "investments to enhance the customer experience," I can't say I have any confidence that Dell will emerge in better shape than it is today.

Plus, there's also the issue of the company's structure, which is, in my opinion, too scattered. Beyond the typical "executive speak," I don't believe Michael Dell has sufficiently explained how the company plans to execute its turnaround. Nor has he offered any hints as to how the company plans to shed its overreliance on the dying personal computer business, which led to a 72% profit decline in the recent quarter.

Dell still believes it has a chance to dominate the enterprise, suggesting that "new tech requires servers, infrastructure and storage capabilities." But IBM ( IBM), EMC ( EMC) and Cisco ( CSCO) all provide these services, and in some cases they do it better. Not to mention, they are better managed and have already made significant improvements in these same areas.

Essentially, not only would Dell need to outperform these rivals, but it would need all three to stumble in order for it to gain any sort of meaningful share. What are the odds this is going to happen?

The good news is the company will no longer have to disclose to the Street how bad things really are. At least the long suffering of shareholders has been put to an end. I just don't believe their patience was worth it.

At the time of publication, the author was long AAPL.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Richard Saintvilus is a co-founder of StockSaints.com where he serves as CEO and editor-in-chief. After 20 years in the IT industry, including 5 years as a high school computer teacher, Saintvilus decided his second act would be as a stock analyst - bringing logic from an investor's point of view. His goal is to remove the complicated aspect of investing and present it to readers in a way that makes sense.

His background in engineering has provided him with strong analytical skills. That, along with 15 years of trading and investing, has given him the tools needed to assess equities and appraise value. Richard is a Warren Buffett disciple who bases investment decisions on the quality of a company's management, growth aspects, return on equity, and price-to-earnings ratio.

His work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets.

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