Dell Makes Argument for Bid to Take Company Private

By Jeffrey Burt  |  Posted 2013-04-01 Print this article Print

The new bids not only call into question the company's future, but also Michael Dell's future. The Silver Lake bid would keep Michael Dell in charge of Dell, but the other bidders reportedly would consider a leader other than Michael Dell. Bloomberg reported April 1 that Michael Dell, who owns almost 16 percent of Dell stock, has met with Blackstone Group executives and would only consider backing the firm's bid if he were to remain CEO.

According to the documents filed with the SEC, Michael Dell approached the board with the idea of taking the company private in August 2012—two months after Southeastern officials first talked to him about such a plan. After that August meeting, the board created a special committee to oversee the buyout process, and in a series of meetings through the fall and into the winter, the panel met with such financial experts as J.P. Morgan to discuss the idea, and heard from Dell officials about the increasingly precarious state of the company.

Like other vendors tied to the PC market, Dell has seen its fortunes take a hit with the rapid growth in tablet and smartphone sales. Dell sells some tablets, but no smartphones. The hope of many of these companies—including Hewlett-Packard—was that Microsoft's release in October 2012 of Windows 8 would boost PC sales. However, the OS did not give the hoped-for boost to the PC market, and throughout the SEC filing, Dell officials and financial experts said the outlook was for the company to continue to struggle over the next few years.

At one point, Dell officials said projections for the company's current fiscal year were now 15 percent below what they were in July 2012, hitting $56 billion. In addition, in a November 2012 meeting, the special committee members learned that the company's revenue for the seven prior quarters had missed management projections and—with the exception of one quarter—financial analyst estimates.

The Boston Consulting Group during a Dec. 5 meeting with the special committee said that for Dell to protect its business, the company would need to compete more aggressively in the higher-margin enterprise solutions and services market, and that its expansion into the space had been slower than expected, despite spending billions of dollars over the past few years to buy companies to bulk up Dell's capabilities in such areas as storage, networking, security and software.


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