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  

Want more articles like this?

 
More on Channel Business
newspapers

Today's channel rundown – 3 May 2016

Daily tech news and analysis channel partners need to know now, including Arrow’s Microsoft sign-up, ransomware’s gap, VMware’s CEO whereabouts and more

newspapers

Today's channel rundown – 2 May 2016

Daily tech news and analysis channel partners need to know now, including Dell’s new channel hire, Microsoft’s product updates, Cypress’ leadership change and more

so-much-mobile-flickr-10412439655-1ee0652aac-z-1

Intel set to exit smartphone, tablet markets - reports

Chip giant reportedly confirms cancelled SoFIA, Broxton SoC platforms tied to newly reset priorities

challenge-difficulty

Sales shift signals opportunity, challenges

Focusing on existing accounts takes some of the pressure off of solution providers, but it can lead to stagnant growth as well

Visitor comments
Add comments
blog comments powered by Disqus
In-depth
keith-mcmanigal

Vendor Q&A Series: Keith McManigal, F5 Networks

The latest channel exec to sit in the new-look Channelnomics hotseat is F5 Networks' regional VP of channel sales for the Americas

challenge-difficulty

Sales shift signals opportunity, challenges

Focusing on existing accounts takes some of the pressure off of solution providers, but it can lead to stagnant growth as well

newspapers-and-glasses

Channelnomics' top five stories of the week - 29 April 2016

Check out which articles grabbed the most attention this week

jessica-m-225x300

Editor's voice: The week's channel chatter - 29 April 2016

What's been happening this week on Channelnomics?