Dell Makes Argument for Bid to Take Company Private
In a meeting the next day, Michael Dell outlined what he would do with a private company, including rapidly expanding its enterprise solutions and services capabilities through acquisitions and R&D, hiring "large numbers" of salespeople, expanding Dell's presence in expanding markets and investing more in PCs and tablets. "Mr. Dell stated his belief that such initiatives, if undertaken as a public company, would be poorly received by the stock market because they would reduce near-term profitability, raise operating expenses and capital expenditures, and involve significant risk," the document states. "Mr. Dell stated his view that a going private transaction was in the best interests of the Company's unaffiliated stockholders because they would receive a portion of the potential upside from these initiatives in the form of a premium for their shares without bearing the risk and uncertainties related to executing such initiatives." Roger Kay, principal analyst with Endpoint Technologies Associates, argued in an April 1 column in Forbes that the only viable option would be to let Michael Dell take the company private and remain in charge. "What the documents make clearer is what has been clear all along," Kay wrote. "Dell cannot grow the new enterprise solutions business fast enough to offset the decline in the PC business. If Dell accelerates this transformation, the interim numbers will look really ugly, and Wall Street is unkind to companies with ugly numbers. The type of investment needed to develop the solutions business will negatively affect profitability for years. Thus, Mr. Dell has proposed to do this makeover as a private company.""Some people believe that Mr. Dell can see something that they don't, some hidden value, and that the company is really worth, say, $16 per share," Kay wrote. "To those people, I'd say, okay, you try running a company that gets two-thirds of its revenue from the declining PC business. There's no magic here, just a guy willing to roll up his sleeves, set his alarm clock every day, and put in years of hard work to make Dell a valuable property again."
Kay downplayed any speculation of a hostile takeover of Dell and asserted that any plan that doesn't have Michael Dell at the helm would significantly harm the company.