Dell Sees Jump in Server, Networking Sales in Q4

By Jeffrey Burt  |  Posted 2013-02-19 Print this article Print

Dell executives are hoping that taking the company private will enable them to accelerate their efforts to remake the company, allowing them to make strategic moves away from the glare of Wall Street and the pressure of having to hit quarterly financial numbers. The company Feb. 5 announced a $24.4 billion leveraged buyout plan that would have Michael Dell and equity firm Silver Lake Partners—with help from other parties, including Microsoft—buying the company in a leveraged buyout. The deal would pay investors $13.65 per share, a 25 percent premium over the share price a month ago.

However, Dell is getting some pushback from large investors, including Southeastern Management and T. Rowe Price, the top two holders of Dell’s outstanding stock. Officials with both companies—as well as some with smaller investors—say the price tag for the company is too low, and that they will vote against the deal unless price-per-share is increased. Southeastern Management officials have gone so far as to say they would consider a staging a proxy fight to keep the deal from going through.

Despite the decline in revenues and net income for the last quarter, those numbers could give shareholders more ammunition for their demands. If such special charges, such as those related to acquisitions, are taken out of the equation, Dell reportedly made $702 million during the quarter, more than analysts had expected.

During the 30-minute conference call with analysts and journalists to discuss the quarterly numbers, Gladden didn’t talk much about the proposed buyout, and Michael Dell was not on the call, as he usually is. During a question-and-answer period, analysts kept away from the subject, but it was a focus of many of them afterward.

“Privatization will enable Dell to align all of its assets around its end-to-end solutions strategy, as it will allow Dell to act strategically on a longer time horizon than the current quarter without the scrutiny of Wall Street,” Technology Business Research’s Macomber wrote. “As a relative newcomer to the enterprise and in delivering end-to-end solutions, Dell faces more work in its journey.

“Dell’s continued evolution into a provider of end-to-end IT infrastructure is a long-term endeavor that requires heavy investment in R&D and acquisitions, calculated alterations to its go-to-market approach, and corporate revenue pressures in the form of declining PC scale—as demonstrated by the company’s 4Q12 financial performance and impending privatization.”


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