Dell Technologies Chief Executive Officer and Chairman Michael Dell has published a new book, “Play Nice But Win.” The autobiography examines Dell’s tactics to go private in 2013. He doesn’t mince words about his feelings for octogenarian activist investor Carl Icahn, who battled him for control of his company, calling him “a circus clown” that he “sincerely hoped never to see or hear from again.”
Dell spoke with CNBC’s Alex Sherman about the process of going private, how he considered selling a large piece of his company to IBM in the 1980s, his potential desire to own a professional sports team, his obligations to society as a multibillionaire, and the recent controversial abortion law in his home state of Texas. This interview has been lightly edited for clarity and length.
Sherman: I’ll start with an easy one. In your youth, as you describe in the book, you were immediately hooked on electronics and taking apart computers, but neither of your parents were engineers. So I just wanted to know, at such an early age, how did you know how to do all this?
Dell: Let me give my dad some appropriate credit here. I mean, he’s basically a scientist, and so all over the house, it was slide rules and graph paper. And he was always doing formulas and math, and he taught us the basics of electronics, and we would do little projects with batteries and motors. I would say a lot of it was self-taught. And the beauty of that time, the dawn of the microprocessor age, is each of the components of a system, there were these books that you could get. The books would basically explain what each chip did. And it wasn’t that hard for me to begin to understand how the whole circuit worked. It was self-taught. And these user groups, I just found the people that knew more than I did and hung around them and learned what I could learn. Experimented a lot. Read a lot. That was pretty much all I was doing, right? So that’s the way. One hundred percent of my time was focused on that because that was what I thought was fun and interesting.
You spend a decent amount of time in the book talking about the process of going private. There are a lot of — I don’t know if I would want to say gaps in logic, but sort of mental gymnastics that go into the way that this all works in this country. You’re rooting for the board to make the decision to rule in your favor. And that decision is basically based on the board thinking the PC market is slowing and growth is slowing, so we should accept Michael’s offer. But of course, that is not actually what you believe. Otherwise you wouldn’t want to go private.
And by the way, I was very clear about this with the public market, right? It’s actually still on YouTube. You can watch my presentation at the Fortune forum in the middle of 2012. I was very enthusiastic. But the market didn’t agree with me.
And then you have another situation when Carl Icahn gets involved, where he’s making the argument that you’re stealing the company at too low a price, which actually is what you believe. You think the company is vastly undervalued.
But he’s not willing to pay even a nano-penny more, correct.
And then Icahn makes the argument that this is a great company, which of course you built. It has your name on it, but he says you shouldn’t be running it. And then at the end of all of this, he walks away making tens of millions of dollars.
Which he mostly got from Southeastern [Dell’s second largest shareholder at the time] because he convinced them to sell a bunch of their stake at a discounted price. All the shares he had bought before then were actually above the deal price. So the really interesting question is what did he tell them that convinced them to sell their stake when they had earlier said it was worth a lot more? But I guess if you sleep with a tiger, you wake up with your arm bitten off, and that’s what happened to them.
So, having gone through this painstaking process, which you outline at length in the book, do you feel like there’s a better way of doing this? Is there a rule or process about going private that should be changed?
Well, I don’t make the rules. I’m not a rule maker, so that’s a question for somebody else.
You also emphasize the importance of having a partner in the management take over and and you say having Silver Lake as a partner was important to make sure stockholders got the best deal possible. But at the same time, you show repeatedly that Silver Lake was actually the limiting factor for why you didn’t increase your price. So it struck me that having Silver Lake as a partner may actually have worked against shareholders getting more for their shares. Is that unfair?
The problem from a legal construct is, let’s suppose that I had an alternate universe where I had done the go-private all by myself with no private equity partner. I don’t think the board would have allowed that process, and probably rightly so. Instead, I said I was willing to work with anyone who will offer the best and highest price to shareholders. And so there were at least three different go-shops to basically understand what the demand was. It was carefully looked at by KKR, by TPG, by Blackstone. And then there was this other go-shop where they went out to like 80 different entities out there. So everybody had a shot.
I think what you’re saying is given the constructs of what was legally possible, that was the best case scenario for shareholders.
Look, it’s easy to after it’s been wildly successful for somebody to say, “Oh, you know this, or that, or the other thing.” But at the time of the transaction, shareholders received a very significant premium on the price before the market knew there was potential for our transaction. And took absolutely none of the risk. And you know, what we did could have failed. Obviously I didn’t do it because I thought it was going to fail. But the shareholders ultimately voted for the transaction.
Dell isn’t in the S&P 500 because there are rules preventing companies with dual class controlling ownership stock, unless you’re grandfathered in. I’m curious, given the increase in the value in Dell, now that you’re more activist-proof, would you consider giving up your voting shares to become part of that index?
Don’t have any plans to do. We just don’t have any plans to do that. Our board regularly discusses that and we believe the structure we have now is appropriate.
Let’s turn to another broad subject that you spend a lot of time in the book talking about, which is acquisitions. I’ve read other books by founders or CEOs discussing their life and the history of the company. And one of the things that’s often in those books is a deal that they almost did, but they didn’t for whatever reason, and sort of ruminating about how the world may have been different had that happen. I didn’t see that in in your book. I’m curious, was there a particularly interesting deal that you almost did that, for whatever reason, just didn’t come about?
Well, we almost merged with EMC.
But that one ended up happening, right? So, putting that one aside.
So, when I was 23 years old, I was approached by IBM, who wanted to do some complicated, convoluted transaction involving some parts of their business and our business. And, boy, I’m glad I didn’t do that.
Meaning they would acquire you, in essence?
It wasn’t exactly that. They had some parts of their business that they wanted to basically merge into our company and take a big stake in the new company.
So this was in the mid-80s, roughly.
What’s next for Dell in terms of M&A? You’re obviously not shy about doing transformative deals. Where do you want to be where you feel you’re not?
First of all, we feel great about the position we’re in. We have super-strong number-one positions in very large market spaces. And we’re building some some new multibillion-dollar businesses in some super-close adjacencies like edge and telco, and business is doing quite well. The demand is strong.
I think what what you’ll see is is a targeted approach to M&A as we continue to use that as a part of our innovation engine. We’re investing four-plus billion dollars a year after the spin. It changes a little bit with VMware, but, still, massive investment in R&D.
We have our [corporate venture fund] Dell Tech Capital, which has stakes 125 or 150 companies. If you want to know what we’re likely to acquire, it’s the kinds of things that are in the Dell Tech Capital portfolio. And then, of course, no company could do everything by themselves or own every other company on the planet, right? So you have alliances, partnerships. We work in an ecosystem of companies together that ultimately create the solutions and the outcomes that customers are looking for.
So, do you think another large deal is in the cards in the roughly near future?
Didn’t sound like it. I want to discuss what’s kind of a third rail for some people, and that’s your net worth. Forbes estimated a couple months ago you have a net worth of about $50 billion. That makes you, in many ways, one of the most powerful people on the planet. I’m curious how you go through your life on a day-to-day basis, thinking about how to use your money. Because I know you have a foundation and you mentioned in the book you’ve contributed $2.5 billion to the foundation, which is obviously quite a bit of money, but still just a fraction of what you have. So I’m curious how you think about the the most efficient ways of using your wealth.
Well, over time, I have contributed more and more to to the foundation. I think you’ll see more and more of that, as I talk about the book. I think the vast majority of the wealth I’ve created will ultimately go to the foundation. And that’s that’s kind of that’s kind of what you can expect to see.
Some of your peers have signed The Giving Pledge. You haven’t. I’m just curious why.
You know, if you read my statement in the book, it sounds a lot like what people say in The Giving Pledge.
Yeah, it does. But is there a particular reason why not to do that, or is it just logistical?
I don’t feel any particular need. I’m not one to join clubs. I’d rather do it my own way.
You talk about rising inequality in the book. Do you feel like our society is structured in a way where if you have this type of net wealth, we don’t have the proper giving mechanisms in place? In other words, like, I feel like I’m probably not the only one who thinks this: I feel like if I had $50 billion in net wealth, I would want to give money to everybody I’d ever had a positive contact with. But it seems to me that society doesn’t really incentivize that type of individual giving. So instead, large dollars are given through these more impersonal foundations and charities and so forth which have wide reach but are less personal. I’m just curious if that bothers you at all.
I would think about it in a bit more structured way, which is to say, all right, we’ve got all these resources. We want to do things that are constructive, and how do we do that in a way that creates the best outcomes and results? You know, I would be less inclined to say, ‘Oh, well, I met this person, and so therefore that means that we should do something here.’ I prefer more of a scientific method driven by data and facts and analysis. That’s kind of the approach that my wife and I take.
There’s almost a ruling class of billionaires in the United States. And they’re your peers: Jeff Bezos, Mark Zuckerberg, Elon Musk, Bill Gates. I don’t know if you include yourself in that category or not, but it seems as though the way the media treats them, we hang on their every word. We write articles about everything they say. Do you think that the founder-CEO billionaire has too much power?
I don’t know. I really don’t know. Ask somebody else.
Well, let me ask you this. In the book, you describe an incident many years ago where an intruder broke into your house and you realized that you wanted to move for your family’s safety. I think the quote you say in the book is “it was time to put a little more space between us and the complicated world we’re living in.” And when I read that, I thought, that’s fundamentally sad.
I mean, it was. It was an inexpensive wake-up call. It was sort of a moment where it was it was clear that we had this naive idea that we could just go live our lives and nobody would break into our house, but that was wrong.
I ask this in total earnestness: Is it lonely being a famous billionaire?
What kind of psychoanalysis are we going through here?
Isn’t that the point you’re making? Like, I was able to live my life in the regular world and then I couldn’t anymore?
I have a great life. I don’t think anybody should feel sorry for me.
You’ve been publicly outspoken about changes to Texas’s voting laws. I don’t believe you’ve said anything about the new Texas abortion law. So I was just curious to hear your thoughts on that and if it affects Dell Technologies at all.
Some days after that occurred, I sent out a note to our team members in Texas. We generally believe that that our approach with our team members in Texas is to give them access to more health care, not less health care. That’s kind of our focus. I don’t know exactly how this gets played out in the courts and legislatively.
Reading between the lines, it sounds like you’re saying that it’s theoretically problematic, but you’ll see what happens. Is that fair?
Yes. I don’t know what’s going to happen.
You bought a minority stake in the San Antonio Spurs recently. I’m curious if you’d ever consider being a majority owner of a sports franchise?
I consider a lot of things.
Does that one strike you as something you’d enjoy doing?
Why don’t you ask me if and when that occurs.
That does not sound like a no.
If your question is, ‘is it within the realm of possibility that I might acquire a sports team?’ I’m not talking about a particular sports team. I’m certainly not talking about the San Antonio Spurs or any particular league. Yeah. I mean, anything’s possible.
Here’s my last question for you. When are you going to space?
I don’t know. When are you going?
That’s not actually my last question. Here’s my last question. Sometimes when CEOs write these types of books, it’s a sign that they’re thinking about legacy, and maybe that means they’re planning on giving up their CEO job. I know you’re only 56 years old, but are you starting to think about perhaps moving to a chairman role and giving up your CEO title as you focus on philanthropy and the many other things you have going on?
No, I don’t have any plans to change what I’m doing. This was a pretty good point after the epic, largest go-private ever in technology, and then the largest merger-acquisition ever in technology. A lot of friends encouraged me to write a book.