Michael Dell's LBO Faces Higher Obstacles

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.

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

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
sales-keyboard-button

Vendors overestimating sales as 100 percent channel

Lancope exec suggests 100 percent channel statement is overused, talks Lancope's channel strategy

treasure-chest-with-gold-coins

HP Storage: Channel 'treasured asset' for capturing mid-market

Executive tells Channelnomics channel partners are key factor amid competition from EMC, Pure Storage

Microsoft Surface Hub

Surface Hub to drive corporate interactive display sales - research

Futuresource Consulting doubles corporate market opportunity forecast from 2014 to 2016

tightrope8679

PC shipments set to stabilize thanks to commercial sector - IDC

Research firm also changes predictions for 2015 PC shipments to show steeper decline

Visitor comments
Add comments
blog comments powered by Disqus
In-depth
hanshake-sunset

The $100 million tech summer

Five companies set a new standard for investment rounds, revealing a possible indicator of where the venture community sees the tech market going

success-game

MSP + SMB = Success

As their market share becomes ever more pressured, MSPs should focus their efforts on the SMB space

filing

Scality success shines spotlight on rise of SDS

The storage market is in a state of flux, and software is the key to unlocking its potential

latency-clock-oct2013

‘Time to get going’ on IoT, but by how much?

Channelnomics talks to channel players about how much IoT should matter to solution providers and how much they should be investing in the emerging technology