Dell Buyout Draws Analyst Praise, HP Attention, Lawsuit Threats
The $24.4 billion Dell deal comes with challenges, analysts say, while rival HP begins targeting customers that may be edgy about the buyout.The announcement by Dell executives that the company is going private in a massive $24.4 billion leveraged buyout surprised few in the industry, given the weeks of public speculation, but that didn’t slow down the pushback from competitors and some annoyed shareholders. Soon after the company announced the deal Feb. 5, officials at Hewlett-Packard released a statement saying they would target Dell customers who might be antsy about what the buyout would mean for them. At the same time, the first of the anticipated threats of shareholder lawsuits surfaced, with lawyers from a New York firm saying they are investigating whether Dell’s board of directors violated any laws by approving the plan to sell the company to a group headed by founder and CEO Michael Dell and whether shareholders were getting a fair price. However, the response from analysts was for the most part positive, saying that taking the company private will give Dell executives the time and space—away from the spotlight of Wall Street and the pressure of hitting quarterly financial marks—to continue their efforts to remake Dell from a PC and server maker to an enterprise IT solutions provider, a journey the company began when Michael Dell returned to the CEO seat in 2007. During that time, Dell has aggressively pursued acquisitions that give it the wide-ranging enterprise capabilities it needs, from Perot Systems in services and Force10 Networks in networking to Wyse Technology and Quest in cloud and software, EqualLogic and Compellent in storage, and SecureWorks in cloud security.
All the while, Dell has been hindered by its reliance on the PC industry—PC sales and related products still account for more than 50 percent of the company’s revenues, according to Gartner analyst Adrian O’Connell. At a time when the global PC market is seeing falling sales numbers as consumers turn to tablets and smartphones, that’s a difficult position to be in.