Rivals Take Shots at $24B Dell Buyback Deal

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Even before the ink is dry on a $24.4 billion leveraged buyback aimed at taking Dell private, rival vendors are taking shots at the deal, which includes a significant $2 billion investment from mutual partner Microsoft.

Well, that didn’t take long.

Even before the ink is dry on a $24.4 billion leveraged buyback aimed at taking Dell Inc. private, rival vendors are taking shots at the deal, which includes a significant $2 billion investment from mutual partner Microsoft Corp.

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First out of the gate was Hewlett-Packard Co., the troubled PC maker and largest Microsoft OEM partner thought by many to have the most to lose to a cozy relationship between Redmond, Wash. and Round Rock, Texas.

"Dell has a very tough road ahead,” read an unattributed HP statement released Tuesday afternoon and e-mailed around to members of the press. “The company faces an extended period of uncertainty and transition that will not be good for its customers.

“And with a significant debt load, Dell's ability to invest in new products and services will be extremely limited. Leveraged buyouts tend to leave existing customers and innovation at the curb,” the HP screed continued “We believe Dell's customers will now be eager to explore alternatives, and HP plans to take full advantage of that opportunity.”

The folks in Palo Alto, Calif. weren’t the only ones throwing cold water on the deal and salivating at the opportunity to capitalize on a little FUD churned up by the Dell maneuver.

Chinese PC maker Lenovo Group jumped into the fray with their own statement as well.

“While we won’t comment on the specifics [of the Dell deal], we remain as always confident in our strategy, our ability to deliver compelling and innovative products and our overall position and performance,” a published Lenovo statement read. “We believe that the financial actions of some of our traditional competitors will not substantially change our outlook. Our strategy is clear, our financial position is healthy and our business is very strong — so we are focused on our products, customers and overall execution rather than distracting financial maneuvers and major strategic shifts.

“This focus is an advantage for us and a benefit to our customers. Lenovo has the best products, a clear strategy and outstanding momentum. We always face tough competition, and we are well prepared to continue to win in the PC+ era by focusing on our own efforts, core strengths and great execution,” Lenovo added.

Dell officials obviously disagree.

“I believe this transaction will open an exciting new chapter for Dell, our customers and team members,” said Dell founder and CEO Michael Dell. “We can deliver immediate value to stockholders, while we continue the execution of our long-term strategy and focus on delivering best-in-class solutions to our customers as a private enterprise.

“Dell has made solid progress executing this strategy over the past four years, but we recognize that it will still take more time, investment and patience, and I believe our efforts will be better supported by partnering with Silver Lake in our shared vision,” Dell said. “I am committed to this journey and I have put a substantial amount of my own capital at risk together with Silver Lake, a world-class investor with an outstanding reputation. We are committed to delivering an unmatched customer experience and excited to pursue the path ahead.”

Indeed, as a private company, Dell may well have more latitude to execute strategic plans and transform the company into an enterprise portfolio vendor with hardware, software, cloud computing and professional services.

But so far the buyback is doing nothing to ease frazzled nerves and strained relations among the remaining strategic vendor-partners concerned.

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