Dell Board Confirms Buyout Vote Delay

Michael Dell has argued that buying the company and taking it private is the best way to accelerate its needed transformation from a PC maker into an enterprise IT solutions and services provider. The company has been battered by the rapid decline in the global PC market, and officials are trying to make it a larger player in enterprise IT by growing its capabilities in higher margin areas such as networking, storage and the cloud. The move echoes what IBM did in the 1990s and what other vendors, including Hewlett-Packard, are doing now.

Michael Dell and other executives could push the company faster outside of the demands from Wall Street and investors. As a public company, they have to be more cognizant of short-term returns for investors and of financial analyst expectations.

However, the proposal has seen significant headwinds since first being announced in February, particularly from larger investors who have said the price undervalues the company and that they will vote against it. Most vocal has been Icahn, who with 8.7 percent of Dell’s shares is the largest outside investor in the company.

Icahn and Southeastern have offered a counterbid that includes buying up to 1.1 billion shares for $14 ($9.19) each and giving shareholders the option of buying more shares in the future. It also would keep the company public, and Icahn has said if he gains control of the company, Michael Dell would no longer be CEO.

The board’s special committee is recommending that shareholders accept Michael Dell’s bid.

Endpoint Technologies’ Kay said the shareholders’ best option is the Michael Dell-Silver Lake proposal, saying it gives investors a good price for their shares and would free the company to accelerate its transformation efforts. The next-best option would be rejecting the proposal and keeping things as is.

Accepting Icahn’s bid would harm the company, he said. Icahn and Southeastern would end up selling off pieces of Dell to gain back the money spent on the company. Icahn’s best hope is that Michael Dell sweetens his offer and his buyout plan is approved by shareholders, Kay said.

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