Editor's note: As part of our special editorial partnership, CRN is publishing this recent Channelnomics article.
Dell confirmed yesterday the receipt of two rival bids by Blackstone Group and Carl Icahn for control of the company that would, in theory, leave a large part of it publicly trade.
The acknowledgment comes with declaration that the competing offers to the one developed by founder Michael Dell could result in the CEO’s ouster from the management team.
Blackstone and Icahn each offered deals that would pay $14.25 per outstanding share for a majority of the IT company, leaving a large portion of the company publicly traded and, thus, retaining value for shareholders.
The original deal developed by Michael Dell and Silver Lake Partners, with the backing of Microsoft, would pay $24.4bn for the company, removing it from Wall Street trading. The strength and appeal of the rival bids opens new questions of what happens to the current management team.
While Michael Dell is obligated to explore options of working with third-parties in the restructuring of the company, neither the Blackstone nor Icahn deal includes retaining the founder as part of the future management team.
Since 2007, Michael Dell has personally led the transformation of Dell from a PC-oriented, direct-sales vendor to a technology portfolio company on par with the likes of Hewlett-Packard and IBM. The company has invested billions of dollars in acquiring companies that add enterprise capabilities in storage, networking, security, cloud computing and professional services.
While Dell’s embracing the channel has helped offset erosion in PC market share, the channel has been unable to stabilize the company’s position in the market. Dell continues to shed PC market share, struggle to form significant beachheads in new technology segments, and remains under pressure in revenue and profit. The company recently revised its 2013 profit forecast from $3.7bn to $3bn.
The logic behind Michael Dell’s plan to take the company private is unassailable. Under the prying eyes of Wall Street, Dell’s management team is torn between having to answer to investors’ short-term interests and the long-term objectives of the company, which are often conflicted. By removing Wall Street from the equation, Dell is better able to complete its transformation. Major Dell investors have cried foul at the proposed privatisation plan.
Southeastern Asset Management and T. Rowe Price have said the Dell proposal undervalue the company, leaving investors without proper compensation. Expectations are Dell and Silver Lake will re-evaluate and raise their bid to as much as $15 per share, or as much as $27bn.
Even so, Icahn – a well-known activist investor – is said to be open to combining bids with Blackstone to create an even stronger offer that is less reliant on outside financing. The concern now for the channel is Dell becoming destabilised.
Already analysts worry that the challenge for control will drag on for months, eroding partner and customer confidence that will affect sales and revenue.
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