Michael Dell hopes he's Steve Jobs, but is he really just Jerry Yang?

By Sarah Lacy , written on February 6, 2013

From The News Desk

The first time I traveled to Jerusalem I was warned of Jerusalem Syndrome. After all, I was traveling with a group of semi-ego-maniacal techies and bloggers -- a group that routinely likes to pretend to play God as is. None of us came down with the desire to heal people, dress in bed sheets or wander in the desert. (Not even Robert Scoble.)

But I recall the description of the strange disorder whenever a returning founder claims to have the secret to pulling off the biggest miracle in all of tech-dom: Returning an ailing technology giant to its former glory.

Of course, it's not the Virgin Mary, John the Baptist, or Jesus these founders have in their minds eye. It's the second coming of the almighty Steve Jobs.

I have a sinking suspicion that Michael Dell may bear a closer resemblance to another returning founder whose tenure was famous for very different reasons: Yahoo's Jerry Yang.

Yang invoked comparisons to Steve Jobs as well when he returned to right Yahoo in 2007. Yang, like Dell, talked about valuable assets -- like Finance, Search, Mail, and IM -- that were undervalued inside a large giant.

And, indeed, it's not that Yahoo didn't have anything going for it. The problem with Yahoo has long been that many of its verticals are too big and too successful to kill, but they simply aren't growing, dynamic, innovative, or exciting to younger audiences.

Just as Kevin Kelleher wrote about Dell yesterday: "Where Dell is a leader, the market isn’t thriving; and where the tech market is thriving, Dell isn’t a leader." Similarly, the areas where Yahoo was strong weren't growing and the growing areas weren't ones where Yahoo was strong.

Back then, Yang was wrapped in a white sheet and lousy with moral authority during his tenure. He was genuinely loved by the team, and he loved them back. But many sources close to him always painted the picture of a man who made too many excuses for his beloved company.

There were plenty of signs of this. Early on, he had a stealthy sit down with the actual Steve Jobs, and didn't make the bold moves he advised, I was told by people familiar with the meeting. He was stunned that he wasn't given a longer time to turn the company around, seemingly unaware of the shareholder pressure that was already on him from day one.

A mutual friend told me he tried to convince Yang to take the company private soon after he took over -- a move that would give him the freedom to dramatically slash jobs at the bloated company and focus on the company's most promising assets. More to the point it would ward off hostile shareholders or an unwanted acquisition. Yang blew off the later two as something that was unlikely to happen. Of course that lead to the single biggest mistake Yang made: Refusing to sell to Microsoft for $44 billion in 2008.

Yang's reasons were largely emotional. He simply saw Yahoo through the rose-colored glasses that a founder wears -- he was proud of its legacy as the dominant portal and still clung to an idea that it could compete with Google, a battle it had long since lost that was distracting it further from the future. In his all lowercase emails to his faithful "yahoos" he talked about Yahoo's brand and name recognition and investments in search as reasons the company was undervalued.

On one level, it's hard to blame Yang. That's the kind of thought process a founder makes. Founders are optimists when it comes to their creations. They see them as part of their legacy. They're emotional about what they've built. The Valley's history books are riddled with founders that were offered perfectly rational -- even no brainer -- acquisition prices and turned them down out of hubris, arrogance, irrationality or other emotions. Sometimes they prove right -- in the case of Facebook -- and sometimes they are wrong -- in the alleged case of Viddy.

By the time Yang returned, Yahoo was a different company living in a different market reality with a different base of shareholders. Despite his long tenure on the board, Yang came across as living in an alternate reality. That's good when you are creating a company, not so much when you are trying to save one.

The reason some of the strongest companies are lead by founder CEOs isn't because a founder is some mythical being who can solve any problem. It's because founders who've stayed CEO have typically grown and adapted along with the company. Taking a founder out and then plopping him back in years later is a bit like sending a handsome and athletic 13-year-old to the prom and expecting him to become prom king.

Oh, but what about Steve Jobs?

The difference between Yang and Jobs is that when Jobs returned, he didn't act like a stereotypical founder. Yang did.

That overused phrase "Steve Jobs did it!" has become the get-out-of-a-rational-discussion-free card for people all over the tech world. But people rarely look at what Steve Jobs actually did to make himself such an exception when it comes to, say, being CEO of two companies at once or returning to resurrect a company that'd been left for dead.

I've discussed the former at length. When it comes to the latter, Jobs was absolutely ruthless. He destroyed dozens of products in development, dramatically slashed jobs and basically went Attila the Hun all over Cupertino. He aggressively expanded Apple into new markets like music, media, and phones and created a whole new product category with the iPad. He didn't come in and defend and rebrand the status quo.

What saved Apple wasn't some reliance on past legacy businesses where it could say it was No. 1 or No. 2 in its core markets. It was destroying nearly everything except Apple's emotional roots and brand and starting a new.

Of course, Michael Dell could do that. He's the head of a privately held company now. He has a lot more latitude to do whatever he wants. But there doesn't seem to be a compelling sense of vision. While Kevin outlined some bold things Dell could do, my hunch is we get what we have gotten so far out of Marissa Mayer taking back Yahoo: ultimately the exact same vision with the same products and same market dynamics, wrapped in new messaging and some niggling layoffs to make the company more lean.

What's more, Dell has had his shot. He returned to the company six years ago, and since then the stock has fallen by more than 40 percent.

Can being private be that different? How much of this is out of founder emotion rather than a clear strategy to make a harsh break with the past?

Dell -- and Hewlett Packard for that matter -- insist that PCs are still a position of strength when selling more lucrative enterprise software. It's a theory Oracle's Larry Ellison -- who knows a bit more about the enterprise software business -- vociferously disagrees with. Ellison is instead shedding Sun's commodity hardware business as fast as he can, openly saying he hopes it goes to zero. This insistence that PCs represent a position of strength sounds a lot like Yahoo's continued instance that the world still wants a portal.

Perhaps the most illustrative example of the difference between Jobs and Dell comes from Adam Nash's blog post a year ago, when Jobs passed away. He talks about his time as an intern at Apple and a meeting he went to in 1997 -- weeks before Jobs came back as CEO.

From his post:

Steve got on stage at the front of the room in Infinite Loop 4, and put a huge, larger than life picture of Michael Dell on the wall. He repeated the news fodder that Michael Dell had been asked recently what he would do if he was running Apple Computer. (At the time, Dell was the ultimate success story in the PC industry.) Dell said that he would liquidate the company and return the cash to shareholders.
Jobs' response was more telling. As Nash remembers it:
And you know what? He’s right.

The world doesn’t need another Dell or HP. It doesn’t need another manufacturer of plain, beige, boring PCs. If that’s all we’re going to do, then we should really pack up now. But we’re lucky, because Apple has a purpose. Unlike anyone in the industry, people want us to make products that they love. In fact, more than love. Our job is to make products that people lust for. That’s what Apple is meant to be. Meanwhile, Dell -- private or not -- is still insisting that selling beige boxes is a good thing. Only now, they'll hitch enterprise software to them and hope to do what HP hasn't been able to.

Dell may have taken the step that Yang would not in taking the company private. But the real question is whether he'll be able to have the emotional distance to make the bold moves he's freed up to make now.

[Illustration by Hallie Bateman]