The Dell Saga continues to the End

Mr. Icahn and Michael Dell are locked in a struggle for control of the once proud computer maker of the same name: DELL. Dell revolutionized the business of computer retailing with its telephone order philosophy which achieved dominance pre-internet. After that distribution channel was rendered obsolete by the Internet, the Company struggled for relevance in a crowded market place. More importantly, since Apple’s introduction (should we say creation?) of the IPad, the PC itself has struggled for relevance. PC sales as a whole are now declining at a double-digit rate—which decline is forecasted to continue for the foreseeable future.

In this gloomy environment, Mr. Dell seeks to take the Company private with a bid of $13.65 per share in cash. Mr. Icahn is offering $14 per share for 72% of the stock; on a fully proportionate basis this works out to $10 per share in cash and retaining a stake in a heavily leverage company. Mr. Icahn has offered an additional “sweetener” — a warrant to purchase additional new shares of the new company.

All of the proxy advisory firms have recommended that shareholders accept the offer from Mr. Dell.

Let me say that I hold Mr. Icahn in reverential regard. He is a brilliant, clever man that has well earned his $$Billions. However, in this case, he is simply pursuing the classic “bridge too far.” Dell, the Company, is facing a life and death struggle for survival. The odds are against its survival in present form. Mr. Dell says to never mind about the PC business, he intends to lead the Company in the continued development of its services business. But the services business is already well developed and populated with many strong entrenched firms like IBM, and the Big Four accounting firms.

My conclusion is that this is not the kind of risk that is appropriate for public shareholders. Rather, this is exactly the kind of risk that should be undertaken by well-heeled financiers like Mr. Icahn or Mr. Dell and his investors. Let the highest bidder win!!!