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    HP CEO Whitman: Dell Swapping Challenges by Going Private

    By
    Jeff Burt
    -
    August 23, 2013
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      Michael Dell will be trading in one headache for another if he takes his namesake company private, according to Meg Whitman, CEO of rival Hewlett-Packard.

      In an interview on CNBC’s Squawk on the Street show Aug. 22, Whitman was asked about the price cutting Dell was doing on some of its products, including servers, to gain market share. She agreed that Dell’s moves forced HP to respond, which cut into revenues.

      “It was certainly a factor,” Whitman said, pointing to the 11 percent fall in revenues for industry-standard servers HP experienced in the last fiscal quarter. “They were very aggressive in the marketplace in pricing. …. We have to respond to that and we have to cope with it.”

      However, she said, the market share gains came at a price, noting that Dell’s second-quarter revenues stayed flat while profits tumbled 72 percent from the same time last year. In addition, Whitman said that CEO Michael Dell’s decision to take the company private is simply swapping one headache for another.

      “We’ll see when they go private,” she said. “They have traded the public market master, which can be challenging from time to time, [for] a private market debt master, and where here you’ve got that kind of debt on a company and you’ve got to meet those capital calls, the whole game is how fast you can pay down that debt.”

      Dell shareholders are scheduled to vote Sept. 12 on a $25 billion proposal by Michael Dell and private equity firm Silver Lake Partners to buy the company and take it private. Like HP, Dell has been hammered by the rapid slide in worldwide PC sales, and for the past few years, executives have been working to transform it into an enterprise IT solutions and services provider.

      Michael Dell has argued that it will be easier to accelerate that transformation as a private company that would no longer have to worry about Wall Street analysts and releasing its financial numbers every three months. The company could focus on long-term gains without having to worry about profits every quarter.

      Michael Dell’s bid has been under fire since it was announced in February; some large investors had said the $13.65-per-share price undervalued the company. However, the CEO has eased those concerns by raising the price to $13.75 a share and including other dividends and payouts. In addition, he appears to have beaten back a challenge by activist investor Carl Icahn by convincing the board of directors to change the shareholder voting rules in a way that will make it easier for him to get the necessary votes.

      Jeff Burt
      Jeffrey Burt has been with eWEEK since 2000, covering an array of areas that includes servers, networking, PCs, processors, converged infrastructure, unified communications and the Internet of things.

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