dell ceo michael dell buyout carl icahn computer pcs shareholder vote
Justin Sullivan/Getty ImagesDell Inc. CEO Michael Dell
By Poornima Gupta

SAN FRANCISCO -- Months of public bickering, secretive backroom negotiations and 11th-hour deals for control of Dell belie the fact that the combatants are vying for a company facing steadily declining sales prospects.

The tussle between Chief Executive Michael Dell and firebrand activist investor Carl Icahn is also starting to spook some customers.

It's the last thing a company, grappling with the ever-darkening global outlook for personal computers, needs. IDC estimates Dell's PC shipments slid 4.2 percent in the second quarter, compared to a year earlier.

Some customers have begun asking if Dell (DELL) is even going to be around in the longer term, said Michael Gavaghen, vice president of sales and marketing at Florida-based Dell reseller SL Powers. Sales are taking longer to close as well, he said.

"We hold their hand and gently say to just table the purchasing decision another few weeks," said Gavaghen. He stressed, however, that customers are "not fleeing by any means."

The cacophony surrounding the $25 billion buyout bid proposed by Michael Dell and Silver Lake Partners has picked up during the past month. Icahn threatened to wage a campaign to replace the CEO and his board, and sued the company in Delaware to try to force an earlier shareholder vote.

Michael Dell raised his offer twice to try to win over major investors. A shareholder vote has been scheduled for September after being delayed three times.

Morale within the company is stable for now, say some employees, though they add that could change rapidly if Icahn has his way and were to reshuffle management.


John Pucillo-Dunphy, senior engineer and owner of Miracle Networking Solutions, a Dell reseller based in Middleboro, Mass., said he supports Dell's going private and is more comfortable with Michael Dell's leadership since it remains unclear what Icahn's long game is.

"I have seen the emails from Michael Dell. I haven't seen anything from Icahn," Pucillo-Dunphy said.

Icahn, who with 8.9 percent of the company is now its second-largest shareholder, has said little about what future he envisions for the company beyond that it has promising prospects based on its large base of PC customers, and that it should remain partly public.

Pucillo-Dunphy said customers are not overly concerned about the drama. "For the most part, they kind of have that mentality that [Dell is] too big to fail."

The company declined to comment on the issue. Michael Dell sent employees an email Thursday exhorting the troops to stay focused. He followed that up on Friday with a similar assurance for customers.

"I know this hasn't been an easy time. The competition has been aggressive during this period of uncertainty, but we are, as we have always been, determined to prove to you why Dell is the best solutions provider to meet your needs," the CEO said.

Watching and Waiting

China's Lenovo zipped into first place for PC sales globally in the second quarter, and its 16.7 percent market share now takes it past Hewlett-Packard's 16.4 percent, IDC estimates. Dell is No. 3 at 12.2 percent.

Apart from personal computers, analysts say arch-rival HP already outpaces Dell in key areas of the industry including networking and storage. HP is also making strides into enterprise computing, catching attention with its just-launched Moonshot micro-servers, intended to save on power and costs for corporations.

"Without individual specifics, [it is] safe to say that the roadmap is robust," said Dell spokesman David Frink, adding that the company will soon host a number of customer conferences around the world to showcase new products and services.

Analysts have so far refrained from estimating the longer-term impact of the battle on Dell's business. They are watching the situation carefully ahead of the company's quarterly earnings release on August 20.

"It's going to be a high-risk and painful process," Morningstar (MORN) analyst Carr Lanphier said, adding that the unsettled outcome "makes customers leery."

The average Wall Street forecast is for quarterly profit of $417 million, about half the $875 million reported a year ago. Revenue is expected to slip 2 percent to $14.2 billion.

Dell's fortunes remain closely tied to PC sales, despite $13 billion in acquisitions since 2008 to expand into everything from software to networking. PC sales, which have been shrinking for the last three years, still yield half of revenue.

Shrinking Demand for PCs

Global PC sales are expected to fall 7 percent this year and 4.5 percent next year, according to analysts at CLSA. Dell's revenue is seen shrinking every year through 2016, according to Boston Consulting Group, the firm hired by Dell's board to review the buyout offer.

"Investors should take the Silver Lake-Michael Dell bid and run for the hills," said Brian Marshall, analyst with ISI Group. He said the company may end up underperforming his earnings forecast of 26 cents a share on revenue of $14.3 billion.

The CEO, responding to opposition to his buyout, had raised his offer price this month by a dime to $13.75 a share and tacked on a special dividend of 13 cents a share. Before the offer was announced in February, shares were trading around $10 apiece.

Michael Dell, who holds roughly a 16 percent stake in the company he started in college in 1984, wants to overhaul it without interference from shareholders. His option involves sticking to a path established years ago, of transforming the company into a provider of services like storage and computing to corporations and government agencies, in IBM's mold.

Yet even if he should triumph over Icahn, some analysts think it may be too late, since a large swathe of the corporate market has been locked up by IBM (IBM) and Hewlett-Packard (HPQ).

"HP and IBM have being doing this for the last seven to 10 years," said Steven Nathasingh, managing director at research and consulting firm Vaxa Inc. "Dell has just started."



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13 Comments

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raidrmik67

The only Dell I ever owned gave me nothing but problems and was the only PC to ever fail me, all my other PC's and laptop have been HP.

August 13 2013 at 1:54 AM Report abuse rate up rate down Reply
vieragam

I have owned Dell computers since my first pc 20 years ago or so. I have been so happy with the computers and the service. I hope you will be around for another 20 years.

August 12 2013 at 7:21 PM Report abuse rate up rate down Reply
progressivehoax

I hope Dell goes bankrupt.

August 12 2013 at 3:57 PM Report abuse -1 rate up rate down Reply
mike at home

Once again the Huffington Post has provided the general public of very useful information and truthful thank you respectfully Michael

August 12 2013 at 12:26 PM Report abuse rate up rate down Reply
demannmarine

I have been using Dell products for over 14 years, BUT now I am using HP, I have had so many motherboard issues with Dell, that I gave up on them.

August 12 2013 at 11:01 AM Report abuse -1 rate up rate down Reply
1 reply to demannmarine's comment
vieragam

HP would not belly up to their responsibility for a computer problem while it was under warranty in the first year. It was my bff's and I hope for your sake nothing goes wrong with yours.

August 12 2013 at 7:23 PM Report abuse +1 rate up rate down Reply
adki55

I had been a Dell user for years. SInce the extreme change in customer servce and revolting experieces with Dell, I am now an Apple user. Too bad.

August 12 2013 at 9:37 AM Report abuse rate up rate down Reply
toosmart4u

My wife purchased a dell and I purchased a cisnet for mine was assembled in the good ole USA. My wife's dell does not function very well today and my cisnet is running just fine. Both about the same age and price. Never look at dell again.

August 12 2013 at 9:13 AM Report abuse rate up rate down Reply
michaelcbarefoot

I love my Dell home computer. I will and never have had any faith much in customer sevice of any computer company except for them to be able to help you take the computer back or refund your money for it after they send you a mailing sticker and a box for it. I bought my PC in Nov. 2004 and had everything high performance almost on it and am still pecking away to post this message today. Educate yourself about these things or simply seek out someone who works on them and where you can get it fixed for a fraction of the price. You have to depend on yourself in this day and age. Think ahead when buying your Dell or whatever computer you get and have some decent firewall/virus protection with some good ram and good sized harddrive and pentium 4 or a gaming processor you will have a solid computer. My Dell only had a few viruses on it about 4 years ago but no hardware problems at all and has been running strong since 2004. Make no mistake quality varies with each company and each company will make whatever cutbacks are nessecary to make profit and in a lot of cases you are just buying the same components and you are simply paying for a "name". Reguardless though I still love Dell computers and I wish they brought things closer to home instead of overseas with customer service. It would make things a lot easier for domestic buyers which to me is where Dell should be focusing more on. The world is a great market too but its shaky over there but here at home it's will always be solid if they invest in it and the companies here that use them or need a few computers to start up companies or offices. I am sure they have thought of this before but they need to start here again and refocus on being number one here again and then try taking on or strenghthening their position on the world market. Just my opinion. If I owned Dell or were running it that is where we would have the big deals and the huge campaigns domesticaly and better customer service with American people at the phones that can speak English well. Have a nice day everyone.

August 12 2013 at 7:22 AM Report abuse +2 rate up rate down Reply
1 reply to michaelcbarefoot's comment
mike at home

Thank you for giving the public this good information most respectfully Michael

August 12 2013 at 12:27 PM Report abuse +1 rate up rate down Reply
Debbie

I don't like tech support or customer service in India. Bring it back home where it should be. My Dell needed fixing and when I called tech suppost the service tag number didn't match my name and address. I bought the dang thing from Sam's club, so I'm guessing it was used. Did someone buy it registered it and then brought it back. I can't do anything except maybe use Sam's for selling me a used computer.

August 11 2013 at 10:08 PM Report abuse +3 rate up rate down Reply
Phyllis

Dell used to be the top, but the last one I bought for them was an absolute nightmare, and the service people in India were the rudest CS people that I ever met, ever day I would spend sometimes or most times six hours on the phone with these people, they would finally get it running, I would turn it off that night, next morning no computer again three months at this. I was ready to sue everyone, went to their website, and there was a notice tht the feds were investigating them. Thank God for QVC they allowed me to send the computer back, that was third Dell two went back, and never again will I eve consider it.

August 11 2013 at 9:51 PM Report abuse rate up rate down Reply
1 reply to Phyllis's comment
chatambob

I agree totally!!!!! We had the same nightmare, never again!!!

August 12 2013 at 1:07 PM Report abuse rate up rate down Reply