Michael Dell and his investors spent twenty-five billion dollars to buy back Dell Technologies. But they weren't really buying a company. They were buying freedom from quarterly earnings pressure.
I'm Phil McKinney, former CTO of Hewlett-Packard, and I witnessed how this pressure shaped decisions for years. Today, we are exploring why the WSJ's recent defense of quarterly reporting misses what actually happens inside corporate boardrooms.
I want to show you what quarterly reporting actually looks like from the inside.
Let me paint you a picture. It's week seven of the quarter, and you're in a conference room with your executive team. On the screen are two critical numbers – your revenue projection and Wall Street's expectations. They don't align.
During my time as CTO at HP, I found myself in these situations repeatedly. R&D projects worth billions in the future would get paused. Innovation initiatives that could transform the company would get delayed.
Not because they lacked value. But because we had weeks to hit the quarterly numbers.
What struck me was how predictable this became. Quarter-end approaches? Cut the long-term stuff. Meet short-term targets. Rinse and repeat.
When your stock price swings ten percent over missing earnings by three cents per share, you optimize for quarterly performance, even when it destroys long-term competitiveness.
Now, this is where it gets interesting. One CEO escaped this system entirely.
Here's the proof that this system is broken.
Michael Dell and Silver Lake paid $ 24.9 billion for one thing: freedom from quarterly earnings pressure, killing Dell's long-term potential.
Dell's explicit goal: “No more pulling R&D and growth investments to make in-quarter numbers.”
What happened next was remarkable. R&D spending jumped from just over one billion to over four billion dollars. That's a 400 percent increase. Dell transformed from a declining PC manufacturer to an enterprise solutions leader.
The return on investment by 2023? Seventy billion dollars.
What Dell did wasn't just a corporate restructuring. It was a twenty-five billion dollar bet that quarterly reporting destroys long-term value. And they were proven spectacularly right.
If you've experienced similar pressure at your company, I'd love to hear a
Published on 1 month, 2 weeks ago
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