Featured Articles

IDC says PC market is rebounding

IDC says PC market is rebounding

Research firm IDC has published its latest report into the state of the PC market and while there are some signs…

More...
TSMC steps up development of 10nm process

TSMC steps up development of 10nm process

TSMC, the world’s biggest chip foundry for hire, has reportedly stepped up development of its 10nm manufacturing process.

More...
Broadwell 14nm desktop comes late in Q2 2015

Broadwell 14nm desktop comes late in Q2 2015

A while ago we mentioned that Broadwell won’t show up in the desktop space this year and we got it right.…

More...
AMD A8-7600 Kaveri APU reviewed

AMD A8-7600 Kaveri APU reviewed

Today we'll take a closer look at AMD's A8-7600 APU Kaveri APU, more specifically we'll examine the GPU performance you can…

More...
EVGA GTX 780 Classified reviewed

EVGA GTX 780 Classified reviewed

The EVGA GTX 780 Classified has been dethroned as the company’s fastest non-Titan card following the introduction of the GTX 780…

More...
Frontpage Slideshow | Copyright © 2006-2010 orks, a business unit of Nuevvo Webware Ltd.
Monday, 01 April 2013 11:44

Dell stuffed if it doesn’t go private

Written by Nick Farrell



We would need to get a loan

Hardware outfit Dell would have to go cap in hand to the bank and take on a lot of debt if it wanted to stay a public company, its board has warned.

In a proxy statement to shareholders the Dell board said it would be dangerous to take on a lot of debt and remain a public company given that its profits were headed down the loo. This is the first sign that it does not like proposals from Blackstone and billionaire investor Carl Icahn.

In a 274-page preliminary proxy statement about a $24.4 billion buyout proposal from founder and Chief Executive Michael Dell and private equity outfit Silver Lake Partners it seemed to suggest that it was the best of all the alternatives. Icahn wanted to pay $15 per share for 58 per cent of Dell, while Blackstone has indicated it can pay more than $14.25 per share. But both deals involve saddling the company with a lot of debt and keeping it public. Silver Lake's $13.65 per share all-cash offer would see Dell go private.

While Dell's statement did not say that the Blackstone and Icahn bids were pants, it warned that any leveraged recapitalization was risky, particularly if Dell was going to remain a public company. If the moves went ahead employee, customer and supplier confidence in the company's long-term prospects would dry up and limit the company's ability to aggressively implement its long-term business strategy.

The statement was based on scenarios examined by Boston Consulting Group, which carried out an independent analysis for Dell. It seems to think that revenues will slip every year to 2016. Dell's board expects fiscal 2014 operating income of $3 billion, down from last summer's internal forecast of as much as $5.6 billion, the proxy shows.

Michael Dell's and Silver Lake's post-buyout plan included adding a significant number of sales personnel and boosting spending on research and development. However it will not buy any new companies or assets. If the restructuring plan was carried out with Dell as a public company, would not be palatable to shareholders and the stock could suffer, Dell said.

According to Reuters, Michael Dell is also worried that Blackstone's offer would dismantle outfit. It will also be inconsistent with his strategy to reinvest in the company. In short Blackstone will asset strip the company. One thing that Blackstone has not managed to obtain is Oracle President Mark Hurd. Hurd was tipped to run Dell if it takes over the company. However it looks like he was washing his hair.

Nick Farrell

E-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it
blog comments powered by Disqus

 

Facebook activity

Latest Commented Articles

Recent Comments