Dell's Buyback Is Something, But Here's What They Should Do


Dell is giving its investors a long-overdue gift in the form of a $10 billion stock buyback authorized by the company's board this morning. That should mitigate some of what could be contentious comments at the company's shareholder meeting later today. Or should it?

Dell is beginning to crawl out from under its rock. Hosting its first analyst conference call last week since August 2006; meeting with shareholders today and hosting an analyst meeting early next year.

But the news today is only a very tiny step in the right direction. Dell's repurchase program is significant by its mere scope: the company's marketcap is only $53 billion, so a $10 billion buyback is a lot. And the stock is up by about 3 percent on the news.

While Dell tries to come up with a way to buoy its shares, it needs something far more systemic: something that cuts to the core of its business model. Surface tricks like a buyback send a message to shareholders that the company has faith in itself. But Dell's news carries another message: this is all the company has come up with in a year under Michael Dell's control, and that there's not much left to do.

Michael Dell needs to spell out some comprehensive strategy to get this company back on track. Market research continues to show Dell losing share against rival HP ; and now, new numbers from DisplaySearch suggest Dell will lose its Number 2 position in laptops to Acer.

The company's revenue enjoyed a nice pop, but Dell was unable to translate that good news to the bottom line. That's unfortunate. And that's a good indication that costs are out of whack. That could mean some desperate measures to re-align the company, but these might be desperate times. HP was able to right a badly listing ship. Dell should be able to do the same thing. But it can't, or won't.

We know the company's turnaround will take some time. But it seems the longer we wait for a direction from the company, the further out any meaningful turnaround moves.

Dell is also badly in need of a PR makeover. The company continues to suffer from bad press. But that's because it has engaged in an old-fashioned Texas tradition of circling the wagons when times are tough. Come up with a plan, step forward, and share it with us.

Layoffs have to be on the table. Non-performing product lines have to be on the table. The company's retail strategy--and recent partnerships--seem to be working. But this company has to come up with a way to squeeze more dollars out of every box. Now is the time. The Vista upgrade cycle continues; component prices continue to fall. The PC industry is going strong. Microsoft , Intel and HP all seemed to indicate their rallies should continue into next year.

Dell investors deserve some answers to some very tough questions. Maybe the toughest question of all: has Dell got any answers to share?

Questions? Comments?