Michael Dell’s Sweetened Offer Should Close the Deal: Analysts
He announced Aug. 1 that he was filing a lawsuit against Dell and the board to prevent any changes in the rules around the proposal, and to push to have the vote—which had been twice delayed already—go as scheduled Aug. 2. However, part of the deal struck between Michael Dell and the special committee put the vote off again until Sept. 12, and made it so shareholders who bought stock up until Aug. 13 can vote. Previously, the cutoff date was June 3. "I think he will do whatever he can to get the deal to go his way, but at this particular point, his options are becoming increasingly limited," King said. Another option is to declare victory in getting more money out of Michael Dell and Silver Lake and move on. "That would be the wise move," Enderle said. "He has made a decent profit. Why waste it on pointless litigation? I think what he does will tell us if he is shrewd or another crazy rich guy with too much time on their hands."It's not unlike what other top-tier vendors—including Hewlett-Packard, Cisco Systems and EMC—are doing as they look to expand their presence in the data center, King said. "It's perfectly logical and the type of strategy that is happening across the industry right now," he said, noting that it's similar to what IBM did more than a decade ago. "It's not rocket science. It's a reflection of the way the larger industry is going." "Basically, he is returning the company to late start-up class and getting out from under the thumb of having to focus excessively on quarterly returns" as all public companies must do, Enderle said. "Turnarounds aren't simple or easy, but [taking Dell private] will make it far easier." He pointed to Hewlett-Packard as a company trapped by the demands of Wall Street. "One if their big problems is they need to make big moves like spinning out printing, but that business represents so much cash and profit, they can't get rid of it because they'd get killed by the analysts if they did, even though it would be the right thing to do," Enderle said. "Dell wants to be able to prune and add with his eye on the future without having to worry about being pummeled because quarterly numbers get hit in the process." For example, if Dell wants to try to another push into the mobile device space for the long-term good of the company, he can do so without having to worry about the short-term gains demanded by Wall Street. "If he wants to make another run at mobile, he'll have to make Samsung-like marketing investments for a year or so, which would cripple his bottom line during the time he is fighting Apple and Samsung," Enderle said. "He can't do that as a public company. So while the move doesn't assure a turnaround—nothing really does—it makes success far more likely, particularly if success also means some kind of measurable market dominance."
Both analysts also said Michael Dell's desire to take the company private in hopes of accelerating its transformation from a PC maker to an end-to-end enterprise IT vendor—and to do so out of the glare of Wall Street—makes sense, and that they were optimistic he can pull it off.