The Entrepreneurial Spirit
Monday, June 16th, 2008
By Michael Lombardi, MBA for Profit Confidential
In late January 2007, computer maker Dell, Inc. (NASDAQ/DELL) was facing many problems. The company was subject to an SEC investigation into its accounting practices. Dell missed its quarterly financial targets and the stock was down 20% over the previous 24 months.
So what does Michael Dell do? He fires his CEO and takes over the position himself again.
Back on February 5, 2007, in my commentary in PROFIT CONFIDENTIAL, I wrote, “As an entrepreneur myself, I think Michael Dell has what it takes to turn his now huge company around. In fact, Dell is likely the only big capitalization stock I like. Michael Dell could be offering us an investment opportunity right now. I guess you can call it Michael Dell’s profit opportunity for investors.”
Dell made $1.16 per share in 2007. In 2008, with Michael Dell himself back at the helm, the company earned 18% more, bringing profit per share to $1.37. As for the stock price, from the spring 2008 general stock market lows, Dell stock is now up 35%.
My message in this story is this: The person that starts the company is often the best person to continue running the company as it grows. Yes, management textbooks will tell us that, as a company grows, it needs to bring in professional managers. And I’m sure Dell did this as it grew.
But it is the entrepreneurial spirit of the founder of a company that builds a company to be larger and more profitable. Take that entrepreneurial spirit away and companies often founder.
Just look at what happened to Apple, Inc. (NASDAQ/AAPL) when they pushed out Steve Jobs. Apple needed to bring back Jobs to “reinvent” Apple. The rest is history. Today, Apple products are money-making machines.
The computer business is very competitive these days. The economy is soft, consumers are spending less. There are definite challenges for Michael Dell. But I believe that he will deliver stronger profits again this year. When an entrepreneur starts making computers in his garage as a teenager and develops his company to $60.0 billion in annual sales, you know he is on to something.
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Michael bought his first stock when he was 17 years old. He quickly saw $2,000 of savings from summer jobs turn into $1,000. Determined not to lose money again on a stock, Michael started researching the market intensely, reading every book he could find on the topic and taking every course he could afford. It didn’t take long for Michael to start making money with stocks, and that led Michael to launch a newsletter on the stock market. Today, Michael only employs the top market analysts and editors. Some of our recommendations have posted gains in excess of 500%! Michael has authored and published over one thousand articles on investment and money management. Along the way to building Lombardi Publishing Corporation, now with over one million customers in 141 countries, Michael became an active investor in real estate, art, precious metals and various businesses. Readers of the daily Profit Confidential e-letter are offered the benefit of the expertise Michael has gained in these sectors. Michael believes in successful stock picking as an important wealth accumulation tool. Married with two children, Michael received his Chartered Financial Planner designation from the Financial Planners Standards Council of Canada and his MBA from the Graduate Business School, Heriot-Watt University, Edinburgh, Scotland.Follow Michael and the latest from Profit Confidential on Twitter
