Today’s focus on Michael Dell was part of an ongoing series Cramer is doing on the business world’s worst CEOs. With Tony Hayward forced out of the top spot at BP, the Mad Money host needs a new face for his Wall of Shame. Dell more than qualifies.
First, the CEO, who served from 1984 to 2004 and then returned in 2007, moved too late to transition Dell away from the low-growth PC market. And second, the company spends virtually nothing – just 1% of revenues – on research and development, while competitors Cisco Systems , Hewlett-Packard , IBM and Oracle devote as much as 8%. This means Dell doesn’t innovate, and therefore can’t compete on quality. Instead it focuses on pricing. But it’s even losing that war now as Asian manufacturers like Acer enter the market.
Also consider this sad but comical point: During its June analyst meeting, Dell touted the PC refresh cycle happening now, as businesses upgrade their computers to run Windows 7. But still the company has issued only inline guidance for 2011.
“Even when the wind’s at this company’s back,” Cramer said, “it can’t really impress.”
The kicker, of course, is that Michael Dell has collected $454 million in pay over the last 10 years. Remember, that came while his shareholders were losing 70% of their investment. Compare that to Apple’s Steve Jobs, who earned three quarters of a billion dollars in the past decade but delivered 968% of upside for his shareholders.
And let’s throw in a Securities and Exchange Commission settlement while we’re at it. Dell paid the SEC $100 million over allegations the company used undisclosed payments from Intel , in exchange for using its chips exclusively, to boost quarterly earnings. That way Dell looked like it was either meeting or beating Wall Street’s estimates.
The bottom line is that the once-powerful Dell has been stagnant for years.
“And the bucks stocks with the CEO,” Cramer said.
When this story published, Cramer's charitable trust owned Apple, Cisco Systems and Intel.
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