Who Can Build The Best Dell: Carl Icahn Or Michael Dell?

Call it the battle of the billionaires. Dell CEO Michael Dell and investor Carl Icahn are both willing to put up billions of their own capital to fight for a company that's future is unclear. But, so far the focus has been more on shareholder stock value than on Dell the company. What the future holds for Dell partners and customers is unclear should either Michael Dell or Icahn take control after a crucial shareholder vote on Thursday.

Michael Dell has declined interview requests to talk about how he wants to run Dell as a private company. When Bloomberg asked Icahn what he would do with Dell, he responded with his typical bravado: "I made an awful lot of money not having plans."

Private-equity firm Silver Lake Partners, which is backing Michael Dell, declined to comment on how it would manage Dell if it won shareholder approval. Icahn and Icahn-backer Southeastern Asset Management didn't return repeated calls seeking comment for this story.

To better understand Dell's future, it's best to look at potential owners' public statements and their track records.

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The Michael Dell Plan:

In filings with the Security and Exchange Commission, Dell details the most complete plans yet should it become private. Dell said it will move quickly beyond commodity PC sales, which constitutes two-thirds of Dell's revenue and move to a company focused on enterprise solutions and services. It also said it would:

* Boost sales of corporate servers

* Focus on storage products that analyze data

* Develop software for mobile device security and for back-end quality assurance for corporate networks

* Spend $1.1 billion annually on new products and research and development

"Despite Dell's investments over several years, the company's transformation is still in its initial stages," the filings said. Dell wrote that the company will make significant incremental investments in end-to-end IT solutions, compete more aggressively in emerging markets, and make investments in PC and tablet business. "These steps in Dell's transformation are needed to restore the company to health in the long term. In the short term, however, they are likely to lower gross margins," Dell wrote in its SEC filings.

Silver Lake has publicly said it wants to expand the company's $1.1 billion in annual spending on new product research and development. This is a crucial area for Dell to grow, said Roger Kay, principal analyst at Endpoint Technologies Associates. He said the only way Dell will be able to spend that kind of money on R&D without having to significantly cut things such as Dell's 110,000 workforce is by not having to worry about revenue and delivering quarterly profits to Wall Street investors in the short term.

NEXT: Dell Hits Home With Partners, But What About Icahn?

Most Dell channel partners are rooting for Michael Dell to retain management of the company. They foresee Michael Dell as causing the fewest waves and keeping the company on the right track.

"I can't see Carl Icahn running a major technology company," said Bob Hochmuth, executive vice president of sales at SLPowers, a Dell partner. "Michael Dell has shown leadership, knows his business, and knows the channel. That's what we need," he said.

That's not to say Michael Dell doesn't have his naysayers. A number of institutional shareholders including T. Rowe Price and private equity firm Blackstone have thrown their support behind Icahn.

Cindy Shaw, research analyst at Discern, doesn't think Dell can succeed with Michael Dell alone at the helm. "If you go up to bat and strike out three times, the odds are good you'll strike out the fourth time," Shaw said. Shaw points out that during his first turn as CEO, Dell typically had a seasoned executive as a mentor or co-CEO, and in the six years since he returned to the company as CEO, he has attempted several strategies that failed to prevent a decline in profits. The company needs leadership with expertise in turnarounds and transformations, Shaw said, skills she does not count among Michael Dell’s talents.

"Unlike IBM, with a successful track record of acquiring companies and integrating them into their business, Dell's track record is mixed," Shaw said. Dell spent $4.9 billion in 2012 acquiring seven companies, most notably software and services firm Quest Software. Now, the company has acknowledged a need to strengthen its enterprise sales and support capabilities to leverage its acquisitions.

Dell doesn't have a culture of innovation and Michael Dell is not the Mr. Fix-It Dell needs right now, she said. Shaw isn't alone.

The Carl Icahn Plan

It's less clear how Icahn or Southeastern Asset Management will implement their plans. Icahn has stated one of his first orders of business would be to oust Michael Dell from Dell's board and shake things up. Lessons gleaned from past Icahn investments in TWA, Dynegy and Motorola suggest that once Icahn and Southeastern Asset settle on a strategy, it will move quickly and could be far more disruptive to Dell than its founder Michael Dell.

NEXT: Icahn's Plan: Slash And Burn?

But if Icahn does have a plan, he's holding his cards close to his chest and avoiding specifics or making fuzzy comments such as: "There's a shot down the road that we could, with the PC business, merge with a Hewlett-Packard or acquire their PC business. Hewlett-Packard, like us, are divided [between PC and enterprise solutions]. We should be divided sooner or later," Icahn said on Bloomberg.

Icahn's usual strategy is to buy a stake in a target company, oust the CEO and then sell pieces of the firm to another bidder at a huge profit, said Endpoint's Kay. He said Icahn's slash-and-burn approach at Dell could leave the company a shell of its former self. "It's pretty clear that Icahn is not going to be good for the company's long-term viability, employees who want to keep their jobs, and Dell partners," Kay said.

Icahn and Southeastern Asset Management are less interested in a portfolio products integrated into a single solution, Kay said. For Icahn the ability to segment Dell into software, hardware, cloud and client divisions might be of more interest in hopes one or more pieces can be sold off.

But Icahn can be a powerful force for good as an activist investor. The Harvard Business Review, in a March 29 blog post, described Icahn as such: "When Icahn doesn't actually get the reins, he often does some good -- shaking up complacent boards and management and motivating them to do what it takes to raise their company's share price and get him to go away. He's much better as a gadfly than as a takeover artist."

Discern's Shaw and others point out there is a big opportunity to run Dell better. Icahn, they said, may not be seen a tech visionary, but he knows how to run a business.

Icahn bought 10 percent of Netflix stock in November 2012, and now the company's shares rose 500 percent. Netflix CEO Reed Hastings told Forbes at first he didn't like Icahn and now "I enjoy his company." Icahn owns a just under 9 percent of Dell stocks.

But Icahn's bull-in-a-China-shop style of management may be too big of a pill to swallow for many Dell partners. "If Carl Icahn took control we wouldn't give up on Dell, but I'd be anxious to see how things unfold and what it means to us."

The latest news on the shareholder votes for Dell is it's going to be close. On Tuesday Bloomberg reported that the Dell board was hoping to postpone Thursday's vote until next week. Sources close to the board told CRN that the vote is still on for this Thursday.