Michael Dell's LBO Faces Higher Obstacles

  • Tweet  
  • LinkedIn  
  • Facebook  
  • Google plus  
  • Send to Kindle
  • Send to  

Founder and CEO Michael Dell’s bid to take his company, Dell Inc., private is facing higher obstacles as the July 18 shareholder vote looms and opponents, led by advocate investor Carl Icahn, gain strength.

Dell founder and CEO Michael Dell delivers his keynote address at Oracle Open World in San FranciscoOn the eve of Independence Day, Michael Dell is looking at a much harder fight to break free of Wall Street through a leveraged buyout (LBO) as opponents gain strength.

Advocate investor Carl Icahn has secured more than $5 billion in financing to fuel is alternative bid that would put cash in shareholders’ wallets, keep Dell focused on growing its PC business and leave a large part of the company listed on the public stock exchanges.

Related articles

The special committee overseeing the buyout is advising Michael Dell and his backers, private equity firm Silver Lake Partners, to sweeten their $24.4 billion offer or risk losing shareholder support. Already, several institutional investors, including Southeastern Asset Management which is backing Icahn’s bid and advocating other shareholders to follow suit.

Michael Dell, according to published reports, has not responded to calls to increase his bid.

Reports indicate that Institutional Shareholder Services, an investor advisory firm, will release an advisory next week that dismisses Michael Dell’s plans and encourages shareholders to reject his LBO plan.

Michael Dell, for his part, continues to evangelize his plan, saying the Icahn counterproposal will cripple the company with debt, affect innovation and drive down employee retention.

Dell Inc. has been a public company for nearly 28 years, during which it became an icon of mass marketing and direct sales of personal computers. The direct sales model hit a wall in the mid-2000s, and Dell was forced to adopt an indirect channel strategy. Simultaneously, Dell embarked on portfolio and focus diversification, in which it adopted enterprise products in security, storage, cloud computing, virtualization and networking.

A large part of Michael Dell’s argument for going private is the need to shift away from PC sales and focus more energy on enterprise and channel-friendly business products. Despite the diversification of its product portfolio, Dell’s revenue – as much as 70 percent – is still tied to PCs, which are steadily declining in sales and profitability.

LBO opponents say there’s still plenty of life in the PC business, and don’t want to see Dell abandon the market prematurely. The opponents are not necessarily against the enterprise and services diversification.

Michael Dell and his supporters argue the company will be hamstrung in their efforts to reform the company if they must continually bow to Wall Street pressure.

 

 

  • Tweet  
  • LinkedIn  
  • Facebook  
  • Google plus  
  • Send to Kindle
  • Send to  
More on Channel Business
contract-drafting

RackWare signs up to NetApp partner program

Firm integrating technology with NetApp and IBM

data-quality

Value over volume, RackWare says of expanded channel partner program

Aim is to have the right coverage with close relationships, VP says

divorce-pa

The velvet divorce? Options and disruptions to come from HP split

News that Hewlett-Packard is breaking into two companies continues to reverberate through the channel. While the ultimate impact on HP partners and customers remains unclear, the new entities will have plenty of options for plying their futures

treasure-chest-with-gold-coins

Channel strikes gold selling to non-techies

Tech sales staff busy selling to business units as much as tech staff, according to Gartner

Visitor comments
Add comments
blog comments powered by Disqus
In-depth
steps55

Time to step up: vendors missing the mark on IoT

A new study by AVG Technologies finds that SMBs and MSPs see tremendous potential in the Internet of Things as a driver of business growth – provided IT vendors and solution providers step up their game

wael-aggan-cloudmask

Vendor Q&A Series: Wael Aggan, CloudMask

The latest vendor executive to sit in the Channelnomics hotseat is Wael Aggan, CEO of CloudMask

healthy-heart

Microsoft getting healthy, thanks to consumers

Is it time to take the software giant off the watch list of tech companies in distress, at least on the consumer side, asks Larry Walsh

John Murdock - Kaspersky Lab

Vendor Q&A Series: John Murdock, Kaspersky Lab

The latest executive to sit in the channelnomics hotseat is John Murdock, Vice President, Channel Sales, Kaspersky Lab North America