Michael Dell Defends $24.4 Billion Plan to Buy Company
In his presentation, Michael Dell said that the best way forward for his company is by going private and accelerating the transformation out of the constant pressure of Wall Street. He is confident in the direction he's steering the company, but added that Dell—the world's third-largest PC maker—still heavily relies on its PC business for profits and revenues, the declines in the business are happening faster than the growth in the company's enterprise IT solutions and services efforts. Dell will have to make significant investments in areas such as storage, software and networking to build up its capabilities. The problem is that such investments, while having long-term positive effects, in the short term will drive down profit margins and increase expenses. As a public company, that could hurt the stock price, he said, noting the hit the stock price took after Dell announced disappointing first-quarter numbers in May. That in turn could make customers reconsider buying Dell products and make it more difficult for Dell to keep quality employees, he said. "As a public company, we must take a more cautious approach to our transformation, because we must consider how our stock price will react to the steps we take and what effect that will have on the company and on customers and employees," Michael Dell wrote. "This hurts the speed and efficiency of the transformation and is not good for the long-term health of the company."Part of Michael Dell's criticism of Icahn's plan was that it would keep the company public, "with all of the issues that make it more difficult, slower and riskier to accomplish the company's necessary transformation." He also said it would increase the company's debt, which if it were to remain public "would decrease the company's financial flexibility and hurt the company's ability to weather an economic or business downturn. It would also jeopardize customer perception and employee retention."
As a private company, Dell can be more aggressive in pushing the transformation efforts without having to worry about stock price.