Pressure mounts on Dell founder

Uphill struggle: Michael Dell is likely to present a chastened face to angry investors at today’s results announcement

When Michael Dell presents his computer company’s latest quarterly earnings on Thursday, it is likely to be a distinctly chastened performance from one of the technology world’s best-known bosses.

In signs of unrest following allegations of fraud against both the company and Mr Dell personally, a quarter of shareholders voting at the company’s annual meeting withheld their support for Mr Dell’s re-election as a director, it emerged this week.

But behind that unusual show of dissatisfaction lies a deeper unease. Since returning at the start of 2007 as chief executive of the company that bears his name, Mr Dell has failed to persuade Wall Street that he can reinvent a company that was once the most feared in its industry.

Dell’s stock has fallen more than 50 per cent over that period, at a time when the Nasdaq is down only 8 per cent.

“I can’t imagine shareholders are too happy with that, or with Michael Dell himself,” said Shaw Wu, a computer hardware analyst at Kaufman in San Francisco. “They haven’t been aggressive enough in fixing their problems.”

The fraud charge from the Securities and Exchange Commission remains a stain on Mr Dell’s personal reputation, in spite of his agreement to pay $4m late last month to settle the allegations without admitting or denying them.

The regulators accused the company and its chief executive of hiding incentive payments it had received to buy chips exclusively from Intel and which had been instrumental in Dell meeting profit targets.

In a letter to Dell’s shareholders earlier this month, two trade union pension funds called on investors to withhold support from Mr Dell in order to put pressure on the company’s board to appoint an independent chairman in the wake of the scandal.

In spite of the 25.1 per cent of shareholders who showed their displeasure, the company said that its board was standing fully behind Mr Dell’s leadership.

However, Wall Street is braced for further evidence of the slow pace of the turnround that Mr Dell has been trying to pull off at the world’s third-largest PC maker.

While a partial revival in the sales of PCs and servers this year has pulled Dell out of the panic it fell into during 2009, concerns have returned since the spring that the rebound will be muted.

Mr Dell has tried to use a string of acquisitions since his return to cut his company’s dependence on PCs and servers, where profit margins are under pressure, and reposition it as a broader supplier to corporate data centres.

However, those deals – including an all-cash, $1.15bn acquisition this week of storage-maker 3Par – have not been big enough to make a difference to its fortunes, in spite of the high premiums Dell has had to pay, said Mr Wu.

Meanwhile, hopes that Dell’s fortunes will be lifted by a broader revival in corporate spending in technology have faded. A warning from Cisco this month that the corporate spending recovery has weakened in recent weeks has added to the general unease.

With his company’s shares slumping by 30 per cent since April, the pressure is growing on Mr Dell to prove his company has a second act.