Dell's Failed "Turnaround" Confirms My Prediction

Over a year ago, I wrote this post concerning a Wall Street Journal article about CEOs returning to rehabilitate the companies they founded or led to prominence.

"In Dell's and Starbuck's cases, I question if they ever will. I believe, for reasons I've discussed in labeled posts on both CEOs and their companies, that competition, growth and simple Schumpeterian dynamics have worked to end their time of consistent outperformance."

This past Friday's Journal reported on Dell's most recent quarterly results. They bear out my prediction. Profits slid 48%, so the firm is planning even more cuts.

This is what is known as a death spiral.

Sure, Michael Dell returned. He's reshuffled executives and pushed some new products. It's not working.

As I expected over a year ago, many trends are against him and his company. Frankly, it remains somewhat surprising to me that so many observers- pundits, analysts, journalists- continue to expect some sort of resurrection of Dell.

But, as my business partner reminds me, most people are sentimental. They like a good human-interest story. They enjoy the emotions accompanying a would-be come back story. Or the failure of one.

But people continue to expect businesses to live forever.

They just don't. Some die. Others should die sooner than they are allowed.

Would not Dell's shareholders have been better off with an orderly dismantling of the firm a year ago, when more value might have been realized for them? Rather than feeding the founder's ego?