THE WALL STREET JOURNAL.
TECHNOLOGY | Updated June 21, 2013,
6:07 p.m. ET
Michael Dell Presses Case
Dell is making himself a pitchman for the $24.4 billion deal he says is
needed to salvage Dell Inc.
Dell chief Michael Dell,
right, visited a new manufacturing plant in Chengdu, China, on June 6.
The computer maker's chief
executive has barely talked publicly about the proposed deal struck in
February to take Dell private—a controversial transaction that has become in
part a referendum on Mr. Dell's stewardship of the company he founded nearly
30 years ago.
On Friday, however, Mr. Dell laid
out in an eight-page presentation to investors why he believes his company
needs time away from the scrutiny of public shareholders to push through a
corporate turnaround that so far has found a rough road.
"As a public company, we must
take a more cautious approach to our transformation, because we must
consider how our stock price will react to the steps we take and what effect
that will have on the company and on customers and employees," Mr. Dell says
in the presentation, which was filed with the Securities and Exchange
Commission. "This hurts the speed and efficacy of the transformation and
isn't good for the long-term health of the company."
The presentation—titled "The
Rationale for a Private Dell"—adds more detail to prior disclosures about
pressures the company is facing. It states that the personal-computing
market is deteriorating faster than expected, and Dell hasn't yet been able
to make up the difference with newer businesses selling corporate software,
computing storage and other services to companies. Dell's market share in
software and services, for example, remains less than 1%, the document
states. The company also is threatened by potential margin erosion from
competition in sales of server systems, and the company's share of the
market for storage systems has deteriorated since Dell ended a reseller
EMC Corp., it adds.
Mr. Dell said the company may
need more cash, and is better off with a duo of determined equity
holders—himself and partner Silver Lake Partners—rather than public
The presentation lays out many of
the same arguments made for months by Dell directors, who voted to approve
the buyout. But this is the first time Mr. Dell is making the case on his
According to a person familiar
with the matter, Mr. Dell released the investor presentation because he is
meeting with Institutional Shareholder Services, which advises stockholders
how to vote on deals and other corporate issues. People familiar with
shareholder discussions believe the recommendation of ISS may be the swing
factor in whether the Dell buyout is approved or defeated.
He plans to meet soon with Dell
stockholders to personally make his pitch, according to a person familiar
with Mr. Dell's plans.
Taking his buyout views directly
to shareholders shows the stakes for Mr. Dell, who is risking part of his
personal fortune and his reputation as a pioneering technology entrepreneur.
He pledged $4.5 billion of his cash and Dell stock toward the proposed
The buyout is facing loud
opposition from investor
Carl Icahn and some other Dell stockholders. The opponents say Mr. Dell
is unfairly taking advantage of a low point in his company's fortunes to buy
Dell on the cheap.
Mr. Icahn said Mr. Dell's
arguments are self-serving. "I have one simple question: If the company is
so bad, why is Mr. Dell fighting so hard to buy it?" he said in an interview
Some of the company'slong-term
shareholders have said their investments have subsidized Dell's push into
newer business lines like computing storage and software, and they believe
the buyout deal strips them of a chance to reap rewards if those businesses
But repeatedly in the investor
pitch, Mr. Dell mentions concerns that employees and companies that buy Dell
products will be unnerved if Dell stays public and is subject to further
punishing stock-market declines.
People familiar with Mr. Dell's
discussions have said he has spent time before and after the buyout was
struck in February talking to Dell customers and assuring them he has their
best interests at heart.
If shareholders approve the
buyout deal in a vote slated for July 18, Mr. Dell would own the majority
2of Dell's stock—giving him much greater influence over the company and its
strategy than he has had. Now, Mr. Dell and affiliates hold roughly 16% of
Dell's publicly traded shares.
It isn't clear that Mr. Dell's
pitch will sway investors who feel shortchanged by the buyout. Some already
have gotten phone calls from advisers working for Dell directors to urge
them to vote for the buyout.
They will soon be hearing from
Mr. Dell too, and likely from Mr. Icahn, who this week floated a proposal
for Dell to stay public and buy back up to $16 billion in stock with the
help of debt Mr. Icahn is seeking to borrow.
People familiar with the
conversations with Dell shareholders say they believe they can win support
for the buyout from a majority of Dell's stockholders. But the vote is
complicated by Mr. Dell not being allowed to vote his stake for the deal,
and by the continued pressure by Mr. Icahn.
Dell shares closed trading Friday
at $13.35, down 1 cent. The stock price continues to trade below the
$13.65-a-share deal price, in a sign market participants believe the buyout
will clear the shareholder vote next month.
The presentation states that Mr.
Dell would oppose an effort to borrow money and keep at least some Dell
shares publicly traded, a type of transaction that Mr. Icahn has supported.
"Adding substantial debt to the
company while leaving it as a public company would decrease the company's
financial flexibility and hurt the company's ability to weather an economic
or business downturn," Mr. Dell said.
Deal watchers have wondered
whether Mr. Dell would want to stay as CEO if company shareholders reject
his buyout deal. In the presentation, Mr. Dell said if the deal vote goes
against him, he would "remain committed to doing my utmost for the company."
Write to Shira
Ovide at firstname.lastname@example.org
A version of this article
appeared June 22, 2013, on page B4 in the U.S. edition of The Wall Street
Journal, with the headline: Michael Dell Presses Buyout Case.
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