Can Dell boy's wheeling and dealing pay off?
For two years, Michael Dell was the technology industry's invisible man, toiling behind the scenes to remake the computer maker he founded three decades ago in his University of Texas dorm room.
Now, with his audacious plan to acquire EMC - the largest tech merger in history - Dell, inset, is launching a once-improbable second act. Having helped finance a $25bn deal to take an ailing Dell private in 2013, Dell is teaming up with longtime private equity partner Silver Lake - and taking on considerable corporate debt - in a $67bn bet that EMC's dominance in servers can help him fend off Hewlett-Packard, Amazon and others in the enterprise computing market.
Tech industry second acts have a decidedly mixed record. Steve Jobs rebounded from years in the wilderness and went on to unleash a series of game-changing products on the world. Meg Whitman, who left EBay after failing to reverse a slowdown, is still struggling to turn around HP four years after taking the helm. Dell (50) must prove the case for getting larger when many of his rivals have come to prize agility over size.
Dell was one of the most lionised ceo-entrepreneurs of the 1990s. His signature innovation was a direct sales model that allowed consumers to build their machines online and then get them delivered to the front door.
Sales soared, Dell became one of the best-performing stocks of the decade and its founder-ceo famously suggested that Apple, then struggling, should shut down and give the money back to shareholders.
In 2004, Dell handed the reins to his hard-driving operations chief. Three years later, Dell returned as chief executive after his company lost the PC market lead to HP; later that year he abandoned the pioneering practice of selling products only via the web or by phone.
Tired of dealing with hard questions from Wall Street, Dell decided to take his company private. Even that wasn't easy. Dell had to overcome a frustrated board preparing to appoint a strong second-in-command over his objection, a bid by buyout firm Blackstone Group that may not have included him, and a potential proxy fight by investor Carl Icahn to install a new board that would have replaced him.
Ultimately, Dell prevailed. He has spent the past two years doing things his own way to prepare for a deal like this. That includes paying down debt, giving him more flexibility. He's invested in his core enterprise products of computers and servers - while pouring money into longer-term bets around the general shift to cloud computing and software.
In February, Moody's upgraded Dell and said it was paying down debt faster than expected. The ratings service said revenue growth would probably remain in the single digits for its computer and enterprise groups.
During a call with reporters on Monday to discuss the EMC deal, Dell touted the debt upgrade. He revealed Dell has hired about 2,000 salespeople, noting that remaining private allows him to make investments without an immediate return.
"He doubled down on the focus of the company," said Adriana Karaboutis, who was chief information officer at Dell until last year. "He was very consistent with his message around the products, the customers, the solutions and the service."
Dell pointed to the broader selection of products and services he can offer customers by merging with EMC. The companies complement each other, he said, because EMC has strong relationships with large corporations while Dell has the market for medium-sized companies covered. And Dell is a big maker of servers while EMC's a leading provider of data storage gear. The new company, he said, "will consist of strategically aligned businesses, which will enable increased innovation, customer choice and the ability to attract and retain world-class talent."
Still, Dell risks becoming a slow-moving behemoth when the rest of industry is running in the opposite direction. The new company will have more than $80bn in revenue and tens of billions in debt. Despite complementary businesses, integration will take time - and HP has already said it will use that period to become even more of a threat.
Meanwhile, disruptive competitors such as Amazon are revolutionising the enterprise business by delivering computing power at lower prices over the web. For both Dell and EMC, the main business is selling companies hardware in a "world moving to off-premise, cloud offerings," Toni Sacconaghi, an analyst at Sanford C Bernstein & Co, wrote to investors.
Dell's longtime colleagues say it would be foolish to rule out a comeback.
"I would never in a million years bet against Michael Dell," said Jim Breyer, a former board member and venture capitalist. He's "fiercely competitive".