The news that founder Michael Dell is coming back to lead his company again is quite interesting. Normally, a CEO change alone wouldn’t totally alter an investment thesis for a stock such as Dell (DELL), but in a commodity business like tech hardware sometimes a new face can really rally the troops.
We all know what Mark Hurd has done for Hewlett Packard (HPQ) and it’s interesting that HP has really been the thorn in Dell’s side during the Kevin Rollins era. Bringing back Michael Dell to lead the company might not seem like a big deal, but he is the company. He started it out of his dorm room before dropping out of college and his name is on these computers. Dell isn’t getting his corner office back for the money or anything like that. HP has been kicking their butts lately, after they did the same thing to HP in the 1990’s, and Mr. Dell has likely had just about enough.
Could this move signal the top of HP’s comeback? That would be a bold statement to make, but I think it could. Check out this two-year chart of DELL vs HPQ:
I doubt Michael Dell would come back if he didn’t have a plan to regain the market share his company has lost to HP. Any success in doing so would likely alter the trend that the above chart shows, which has really gotten embarrassing for the former PC leader.
Does this mean DELL shares are a buy? Well, the stock isn’t that cheap, and even if the company can take back some market share, it will be tough to get margins back to where they were in 2005 and also gain ground on Hewlett Packard. Dell stock has likely put in a bottom, but I wouldn’t expect a turnaround overnight.
If you have been fortunate enough to own HPQ lately, however, I would consider taking some profits. While Dell might not regain its former glory quickly, it could certainly halt Hewlett’s momentum at the very least.
Full Disclosure: No positions in DELL or HPQ