Icahn’s Challenge to Dell Deal Dies With Judge’s Ruling

By Jeffrey Burt  |  Posted 2013-08-19 Print this article Print

Dell will have to sacrifice profits in the short term in order to make the transformation, and could end up as a smaller company, he said. That is difficult to do if executives have to unveil their financial numbers to Wall Street analysts every three months. Private companies don’t have to worry about what those financial analysts have to say.

“As a private company, they can do that,” Kay said of spending money despite the negative impact it would have on profits. “As a public company, it’d be a total failure. …  As a private company, you don’t have to please Wall Street. You just have to pay your bills.”

Enderle said the second-quarter financial numbers released by Dell last week—profits fell 72 percent, thanks to poor PC sales—illustrate the problems the PC maker faces as a public company.

“The recent earnings numbers absolutely support the plan,” he said. “They need substantial reorganization and the numbers showcase they are trying to hold onto share but sacrificing profits to do so. That’s treading water. [As a] private [company], they could focus on building a very different business and not worry as much about quarterly profits for a time. While not absolutely necessary, going private removes much of the complexity and distraction surrounding a major company restructure and they need every advantage as these are very difficult to pull off.”

Michael Dell’s deal for a while was in trouble. However, he and Silver Lake upped their offer to $13.75 per share, and the Special Committee agreed to change the voting rules so that shares that weren’t voted weren’t automatically counted as “no” votes. The change essentially ensures that Michael Dell’s offer will garner the majority of votes.

And now the Delaware Court of Chancery has removed Icahn as a threat to the deal. However, as the second-largest shareholder after Michael Dell, Icahn promises to reap millions even when the Dell-Silver Lake bid goes through.

And according to Kay, that is pretty much what Icahn was shooting for in the first place, the chance to increase the money paid to shareholders. As with similar battles he’s had with other companies, Icahn in the end wants a solid pay day, Kay said.

“Even though he rattles his sabers … it’s just a feint,” Kay said. “He doesn’t want to run a computer company. Just the opposite. … Michael Dell wants to run this company.”


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