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Two Outside Bids For Dell Threaten Founder's Buyout Plan 79

Posted by timothy
from the round-rock-rumble dept.
An anonymous reader writes "Seven weeks ago, Dell announced a definitive agreement to be taken private by a group led by founder and CEO Michael Dell and the private equity firm Silver Lake Partners, assisted by a $2 billion loan from Microsoft and debt financing from a group of big banks. The deal was valued at $24.4 billion ($13.65 per share of Dell common stock), but allowed for a 45-day "go shop" period for alternative bids to be submitted to a special committee of Dell's board. Not all large shareholders were happy with the price, and early this month billionaire investor Carl Icahn threatened to tie up the buyout in court unless a large special dividend was paid to shareholders — without showing interest in buying the company himself. More recently, the private equity firm Blackstone Group jumped into the fray, and by Friday night's deadline both Blackstone and Icahn had submitted bids for Dell exceeding the original $13.65 per share agreement. Blackstone is said to be interested in installing Oracle's Mark Hurd as CEO, replacing Michael Dell. As Hurd was fired as Hewlett Packard's CEO in 2010 for alleged sexual misconduct involving an outside consultant named Jodie Fisher, he might have difficulty landing another CEO job at a publicly traded company; the Dell position could be an intriguing fit for both sides."
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Two Outside Bids For Dell Threaten Founder's Buyout Plan

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  • by vswee (2040690) on Sunday March 24, 2013 @05:21AM (#43262057) Journal
    Lets pool our loose change together and buy dell for ourselves! Anyone interested?
    • by Anonymous Coward

      Not Interested.

      Not sure why anyone's interested actually. Can someone explain why I'd want to own a commodity PC maker?

      Competition is fierce, margins are thin, almost nonexistent.

      It's like the Unix workstation market in the early 90s all over again. Someone like Lenovo or HP could buy them to eliminate them from the playing field. But why buy them – just wait and they'll probably eventually fail on their own.

      Or tell me how I can build a product with a decent margin that people will line up to buy. Lik

      • by Anonymous Coward on Sunday March 24, 2013 @06:31AM (#43262191)

        This post represents the largest and probably most common misconception of Dell. While it is still a commodity PC maker, the lion's share of its business is not in that space. The buying spree it's used over the last 7 years has transformed it. Unfortunately, most people only think of it in terms of the PC business.

        Until it can change this image, it may be difficult to change the share price. Hence, going private could allow it to more easily transition the business and its public face.

        • Not to mention the vast number of companies that buy Dell PC's and servers still, year after year. Margins are low, yes, but the repeat business and volumes involved are nothing to sneeze at.

      • You're forgetting their purchases of Compellent and Force10. Dell figured out awhile ago that there's no real future in commodity PC making, and decided to focus on providing services, as well as a complete end to end data center solution. Where Dell makes their money now is by selling you Dell servers, Dell network gear, Dell storage, and the service contracts that go along with supporting all of that.

    • by PolygamousRanchKid (1290638) on Sunday March 24, 2013 @06:49AM (#43262231)

      Lets pool our loose change together and buy dell for ourselves! Anyone interested?

      That won't work. They won't accept Slashdot-ers' Bitcoins . . .

  • by jasenj1 (575309) on Sunday March 24, 2013 @05:26AM (#43262073)

    "Hurd was fired as Hewlett Packard's CEO in 2010 for alleged sexual misconduct involving an outside consultant named Jodie Fisher."

    As I recall, Hurd was not fired only for the sexual misconduct, but the falsifying of expense reports and other misuse of corporate money to cover up the affair. Sleep with whoever you want, but when you steal company money, you're gone.

    http://www.huffingtonpost.com/2010/08/06/hp-ceo-mark-hurd-resigns-_n_673858.html [huffingtonpost.com]

    • True that. A fellow founder of a startup I was involved in got caught doing some shenanigans after we went public. It cost him big. If we were still private it would not have been such a big deal, but once you are public the rules change.

      Longer version - he was the head of sales, and had been padding his expense reports for a long time but we put up with that. He also found ways to take 'short cuts' to vacation spots on the way to legitimate business events. But then he went to our our new East Coast d

    • by symbolset (646467) *
      Hurd was CEO of HP from 2005 to 2010. In that time despite weathering a global meltdown shares of the company increased in value from $20 to $46. In the time since it has not done as well, though it seems to be rebounding right now.
  • Too Bad (Score:5, Interesting)

    by indytx (825419) on Sunday March 24, 2013 @05:47AM (#43262103)
    I was actually fairly optimistic about Dell taking his company private in hopes that he could get away from the quarterly "How much did you make these last three months?" As I understood things, Michael Dell felt that Wall Street had crushed the life out of his company or its ability to innovate. Dell offered pretty good business products and services fifteen years ago (next-day warranty on-site repairs to BFE, Texas). Now it's just a target because of its cash on hand and the value of its financing business. Sigh. Of course, in the grand scheme of things, it's been so long since Dell made quality business computers, I find it hard to believe that quality would once again become important without firing everyone in management, and that almost never happens. Still, it would have been nice.
    • Re:Too Bad (Score:5, Funny)

      by bsane (148894) on Sunday March 24, 2013 @06:41AM (#43262217)

      Meh- he should just liquidate the company and give the money to the shareholders...

      • That's probably Icahn's plan.

        The man was, IIRC, the inspiration for Wall Street's Gordon Gekko.

      • by hb253 (764272)
        If a private equity firm ends up buying Dell, you can be sure they will structure the deal such that they suck it dry and leave it bankrupt and eventually out of business.
        • by Rick Zeman (15628)

          Isn't the definition of a PE buyout a mugging where the victim beats himself up?

        • That's why it only works if Michael Dell is the one at the top. At least he has a big stake in the company because his name is on the door... He won't want to chop it up and part it out so quickly.

          The other player are just pumping their stocks so they can bail when it goes private... They won't have nearly as much power to corner the stocks as they have now.

    • by lucm (889690)

      Dell has been in transition for a while. They are moving toward professional services, software and stuff like data center hardware and automation; they did a lot of acquisitions in that spirit recently, such as Quest software, Equallogic and Compellent (enterprise storage), etc. Michael Dell has explained many times that they kept selling PCs so they get volume pricing on parts they use in servers too, not as a business focus.

      IBM did the same kind of transition a long time ago (hence Lenovo). Apple also ch

    • by Virtucon (127420)

      Well interestingly enough, if somebody is upping the ante so to speak on a buyout, that means that they see value in the company. Nobody is going to invest Billions in a company only to see it dismantled or lose significant value, that is unless your HP (in terms of their Autonomy and EDS deals). The idea of Hurd being involved is disquieting and they may as well dredge up Carly Fiorina if they really want to put the nails in the coffin for Dell. Unfortunately for Dell, the landscape is changing. PC sal

      • Re:Too Bad (Score:4, Informative)

        by Telvin_3d (855514) on Sunday March 24, 2013 @11:00AM (#43263289)

        Nobody is going to invest Billions in a company only to see it dismantled

        That's exactly what they do. Buy it up, run up a massive debt which is used to pay out the equity firm and shareholders and then leave the smoking corpse massively in the hole while they walk away with the profits. And once it's a private company again the books are no longer public so its easy to hide the financial situation until they have finished sucking it dry.

  • Poison bids (Score:5, Interesting)

    by Anonymous Coward on Sunday March 24, 2013 @06:04AM (#43262139)

    Neither Icahn, nor Blackstone were interested before Dell made the offer.

    Icahn is a very divisive man, if you recall the Microsoft bid for Yahoo, he came in pretending to be an activist investor. Actually he didn't use his own money, he took European style put options on Yahoo. He then negotiated a package with Microsoft which he pretended was worth about $20/share, but actually included loans and was worth only about $8/share.

    http://seekingalpha.com/article/80626-carl-icahn-yahoo-raider

    One of the terms was that Microsoft would buy a portion of Yahoo stock at an inflated price in future (unspoken but obvious was that this would be Ichans stock, in effect it was his fee for destroying Yahoo).

    He's turd, a lying corporate raider that's made billions by from shareholders using raider strategies. So as soon as I see his name attached to this, I immediately think he's taken out options on the stock and wants to drive the price up with a fake bid.

    • by Anonymous Coward on Sunday March 24, 2013 @06:33AM (#43262197)

      So Icahn claimed the deal was worth $33 a share, in fact he was including Yahoo cash in the numbers which was already owned by the shareholders, he proposed they distribute their cash to the shareholders. He then included an interest bearing loan from Microsoft as a gain to shareholders, it isn't, its money to Microsoft as interest from Yahoo for money it doesn't need to lend (well unless they hand their cash reserves to shareholders making them vulnerable to creditor Microsoft).

      Then there's the final claim of value, the $19.50 a share he claim Yahoo would be worth after it had been stripped of assets, and in debt to Microsoft:
      http://news.cnet.com/8301-1023_3-9990402-93.html

      Microsoft had agreed to buy a portion of shares at that price in future. Almost certainly Icahns block of puts. That number is because he had put options at $19.50 which would be placed on expiry. You can see how he did a deal with Microsoft to enrich himself while trying to deceive the existing shareholders.

      He lied to them about the value of the deal, it would have left Yahoo's advertising income dependent on Microsoft, whilst at the same time putting them in debt to Microsoft and stripping them of cash so they're easy to knock over.

      He's bad news, if he's involved in a bid for Dell, you Dell shareholders are about to be ripped off.

      If he gets his way, he'll be rich and you'll be poor. If he doesn't get his way, he agitates the company enough to drive down the price. By the time his guys had left the Yahoo board, Yahoo was practically gutted of its advertising revenue at Microsoft's gain.

  • by Bearhouse (1034238) on Sunday March 24, 2013 @06:18AM (#43262167)

    Hurd? Seriously? What did he do to turn around HP's operations before he got fired?
    What makes these private equity guys think they can invest a ton of (borrowed) money in Dell and then somehow turn it around so dramatically that they will be able to make a profitable exit in the near future?

    I can understand MS propping up Dell with a soft loan from their cash pile, to safeguard one of their biggest conduits to market. Maybe also as a potential OEM for MS hardware, (less likely). But Blackstone? Hell, it's not like Dell has a load of assets to sweat and strip either, they are pretty legendary for running a lean operation. Biggest assets must be Dell's name and a customer base that has loyalty based on price...

  • by Anonymous Coward

    If you want someone to collide with an iceburg, Mark Hurd is the rare sort of individual who can set a course straight for the one most likely to sink your ship. C'mon, the guy has such a lack of ethics, combined with a lack of subtety, that he got caught using company funds to pay for his girlfriend. And the best plan for your investment is to hire this weasel.

  • As Hurd was fired as Hewlett Packard's CEO in 2010 for alleged sexual misconduct involving an outside consultant named Jodie Fisher, he might have difficulty landing another CEO job at a publicly traded company

    Between this and the media's sympathy for the Steubenville rapists, it's so "heart-warming" to see so much concern for the career prospects of sexual predators.

    • by gatkinso (15975)

      To be fair, the label "predator" is a bit strong on this case. "Pig" is more appropriate.

  • by Anonymous Coward on Sunday March 24, 2013 @07:29AM (#43262317)

    Dell should let either Blackstone or Icann purchased his share. Let them both have Dell Computer on their hands. Let's see whether they can control a "real" company instead of just trading it.

  • Don't let past Oracle execs run your company. Oracle has single handedly destroyed Java by their indifference/incompetence.

  • billionaire investor Carl Icahn threatened to tie up the buyout in court unless a large special dividend was paid to shareholders

  • After all, he will only make $20 billion as opposed to $30 billion.

    What a tragedy.

  • This is too wonderful for words to describe:
    Dell, Hurd, Icahn, Ballmer, Ellison, all in one place?
    Let them have a meeting and use a mini-nuke on the place.

    Are we sure that we can not get Apple interested as well?

    In one small step the whole USA tech environment could be improved beyond measure.

    Opportunities like this should not be ignored!
    Maybe we could get the Chinese to "buy in", and have the dirty work executed by the Taliban
    or perhaps North Korea?

    I smell a book deal..

    • by game kid (805301)

      This is too wonderful for words to describe:
      Dell, Hurd, Icahn, Ballmer, Ellison, all in one place?
      Let them have a meeting and use a mini-nuke on the place.

      I like this idea, except the "mini" part. Super-size it, lest they survive and lich out on us (can you even imagine how dangerous a lichform CEO can be!? They can freeze, teleport, and make business deals!).

  • $2B from Microsoft (Score:4, Insightful)

    by bill_mcgonigle (4333) * on Sunday March 24, 2013 @11:08AM (#43263325) Homepage Journal

    I'm surprised this opportunity hasn't given Microsoft the impetus it needs to do the "whole widget" thing, like it seems to envy in Apple. Really, with Microsoft owning Dell, many of the corporate players who buy IBM, HP, et. al. would quickly jump ship to avoid the finger-pointing the 3rd parties are capable of getting away with. Since the DoJ consent decree is expired, it would seem like the right time, but perhaps this becomes easier after the private sale is complete.

  • by Anonymous Coward on Sunday March 24, 2013 @03:36PM (#43264975)

    I used to work for Dell Services. Our entire management chain was in India. They outsourced the division president around Christmas. When I looked on line it was India all the way up the chain. My manger was in India. I talked to her 4 times total in 2 years. We would get invited to meetings in India at 2 AM. So it is obvious where they are going.

    Dell brings a lot of H1-B and L-2 visa transfers over instead of hiring Americans and is pushing as much work to India as possible. The job I was in did not have alot of hours and they were not ripping me off. I can't speak for Dell corporate. Dell services was Ross Perot's company. Its basically just a big contracting company. It is more than a body shop since they don't bid on small projects. That was a Perot policy. They had layoffs at the end of the year. I don't know anyone who was here on a Visa who got laid off. If the new H1-B visa thing goes through I expect more non-Visa Dell employees will be deemed 'unqualified' and replaced.

    For those wondering non-managers don't get raises. It is pay for performance, but no one does well enough to get a raise They also slashed benefits. Medical benefits now only cover generics. This means if there is a semi-like generic and your doctor says you need this other drug (noteably a cancer drug) you get NO coverage whatsoever.

    A higher price for Dell going private is bad for employees. When companies get bought out it is with loans. The service on the loan is paid from profits in the company. It goes right on the books. Banks won't give loans this big unless they can use the company as equity. Which means that if they can't pay the loans, then the company gets broken up and sold in pieces to pay the banks back. This usually means wage and benefit cuts. In Dell's case it means more Americans get canned for jobs in India for Visa transfers to the US.

    They do some silly stuff. They had this video on the internal site where they said everyone is a customer service rep. They wanted people to volunteer their time to provide online customer service to people on top of their regular duties. It was so pathetic a group of us were making fun of the video.

    • by Xest (935314)

      FWIW I and both my previous employers all stopped using Dell when they started to move to India.

      It coincided with a massive decrease in build quality and support quality - laptops turning up without keyboard cables plugged into motherboards, tech support folks in India insisting they need us to give them the error message on screen before they can get an engineer out when we phone up to tell them the laptop is completely dead and wont turn on.

      Prior to the outsourcing moves we actually used to really like De

  • As much as Dell has tried to branch out into other lines of business besides commodity PC's, Wall Street still sees them as PC makers. Sure, they do a lot of work in the Enterprise space but, try as they might, they can't shake that "PC maker" label. Dell bought Perot Systems a few years back, trying to get into the Enterprise Software business. I could probably count on one hand how many deals they have won since then. Maybe Michael Dell can turn it around but he's got a tough road ahead of him. As far as

  • by godel_56 (1287256) on Sunday March 24, 2013 @07:17PM (#43266289)

    After being sacked for cheating on his expense account to shack up with his mistress, at the rate of $10,000 to $20,000 a time:

    Hurd acknowledged there were "instances in which I did not live up to the standards and principles of trust, respect and integrity that I have espoused at HP." Hurd, who is married with two children, will get a $12.2 million severance payment and nearly 350,000 shares of HP stock worth about $16 million at Friday's closing price. The company also extended the deadline for exercising options to buy up to 775,000 HP shares."

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