Dell in Rare Feat as PC Speech Gets Investor Cheers
By Serena Saitto - Apr 26, 2013 12:00 AM ET
Michael Dell this week accomplished a rare feat in the era of the
smartphone: He drew applause after a speech on the future of personal
Dell spoke at the annual meeting of Silver Lake Management LLC, which
joined with him to take private the PC maker he founded in 1984, according
to attendees who declined to be identified because the event was private.
Dell, 48, was the surprise speaker at the dinner hosted by the
private-equity firm at the Mandarin Oriental Hotel in
Manhattan on Tuesday, the first day of the firm’s two-day meeting for
investors, or limited partners.
Dell, who addressed about 300 investors on the condition that he not be
asked about the $24.4 billion leveraged buyout of his company, said PCs
will remain critical for businesses around the world, according to
attendees. The view undercuts reports of record declines in global
industry sales, which in part prompted
Blackstone Group LP (BX)’s April 18 decision to drop plans to bid for
Dell Inc. (DELL) Blackstone also cited the company’s “rapidly eroding
financial profile” as a reason for pulling out.
Silver Lake’s leveraged buyout of Dell is an opportunity for investors
to profit, said a limited partner who attended the dinner and asked not to
be identified. The investor said he believes, like Michael Dell, that the
world still needs personal computers because software runs on hardware.
Michael Dell teamed up with
Menlo Park, California-based Silver Lake to take the company private
in the largest buyout of a technology company since the financial crisis.
They offered $13.65 per share in a deal that would require founder Dell to
roll over his stake in the company to help finance the transaction.
Blackstone in March expressed interest in acquiring a controlling stake in
Dell for $14.25 a share, before dropping out a month later as global PC
sales tumbled. Technology research firm IDC said in an April 10 report
that PC sales sank 14 percent from a year earlier in the first quarter.
Blackstone also cited other concerns. At the end of March, Dell lowered
its forecast for
operating income for the current year to $3 billion, a 19 percent drop
from the previous forecast made around the time of Blackstone’s initial
overture in March.
The founder, chief executive officer and largest shareholder of
Round Rock, Texas-based Dell, also spoke on Tuesday about the
importance for its customer base of information-technology security, the
promise of cloud computing and his firm’s plans to develop more products
to meet those needs. Dell has invested in some of these areas, with
acquisitions last year such as network-security company SonicWall
Inc., and Wyse Technology Inc., which makes desktop devices for cloud
representative for Silver Lake declined to comment.
David Frink, a spokesman for Dell, said that “Dell’s speech reflects
the company’s strategy,” while declining to comment further because he
wasn’t at the dinner.
Michael Dell’s speech at Silver Lake’s dinner was echoed in a letter he
sent to employees earlier that day after meeting the company’s teams in
Austin, Round Rock,
Oklahoma City and Nashville.
“There is still opportunity in PCs,” Dell wrote in the letter, which was
disclosed in an April 23 filing with the U.S. Securities and Exchange
Commission. “The global PC installed base is roughly a billion-and-a-half,
and millions of people in
emerging markets continue to come online every week. Overwhelmingly,
PCs are still how business gets done around the world. We are fine tuning
and investing in our business to innovate and compete more aggressively
where growth is happening.”
This was the first time Silver Lake held its annual meeting in
New York, which was also attended by executives of some of its
portfolio companies. They include Alibaba Group Holding Ltd.’s Chief
Financial Officer Joseph Tsai, and Hollywood talent agency William Morris
Endeavor Entertainment LLC’s co-CEOs Ari Emanuel and Patrick Whitesell.
Last year, Silver Lake convened its investors in
California, where Microsoft Corp. CEO
Steve Ballmer was the guest speaker.
The fact that Silver Lake this month raised a $10.3 billion fund, the
largest ever dedicated to buyouts of technology companies, is a sign of
investors’ confidence in the firm, said David Fann, CEO of San Diego-based
TorreyCove Capital Partners, which advises institutional investors on
Silver Lake gathered money for the fund “in a difficult fundraising
environment,” Fann said. “This speaks volumes about the respect the firm
commands from limited partners.”
contact the reporter on this story: Serena Saitto in New York at
To contact the editor
responsible for this story: Jeffrey McCracken at
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