Michael Dell, Who’s Your Daddy?
Michael Dell should ask himself a simple question: “Who is my daddy?” He says his current daddy — Wall Street’s army of sell-side analysts and impatient investors with their insatiable thirst for short-term results — makes it impossible for him to transform Dell from a PC maker into a technology services company. He doesn’t want Wall Street to be his daddy anymore; he wants to grow up and be his own daddy, and thus he is taking his company private.
On the surface this switch makes sense. Wall Street’s time horizon has been shrinking for decades. With Nobel-winning theorists and their by-products — betas, thetas and whatever other “etas” — leading the charge, investors’ long-term decisions are analyzed on a daily and monthly basis, thus turning what might otherwise be long-term investors into long-term traders (an oxymoron).
The media are, of course, a great amplifier of this misalignment. A recent Wall Street Journal article that describes Coca-Cola Co.’s “performance” is a great example of this: “Over its past 20 earnings releases, the company has lagged behind estimates only three times, and always by less than 1 percent.” This is statistically accurate but primitive journalism; a ten-year-old could have written this sentence describing how “well” Coca-Cola management performed. I don’t want to beat up on the Journal too much — the article did have some meat in it — but “beating” the guidance is a game that has little to do with Coke’s core business.
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