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Businesses The Almighty Buck Hardware

Blackstone Drops Dell Bid, Cites Declining PC Market 137

Posted by timothy
from the we-didn't-want-that-anyway dept.
An anonymous reader writes "The Blackstone Group has notified Dell's board that it has ended its bid for the company after performing 'due diligence' on Dell's books. The private equity firm gave two reasons for its withdrawal in a letter to the special committee of the board reviewing privatization offers: the 'unprecedented 14 percent market decline in PC volume in the first quarter of 2013' and 'the rapidly eroding financial profile of Dell.' IBM's recently announced intention of withdrawing from the x86 server market may have also spooked investors. Blackstone was one of two outside bidders that emerged after founder Michael Dell and Silver Lake Partners announced a deal to take the company private for $24.4 billion. The remaining bidders did not comment on Blackstone's withdrawal; however, the Bloomberg piece notes that Dell's original deal with Silver Lake Partners contains language preventing the latter from backing out."
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Blackstone Drops Dell Bid, Cites Declining PC Market

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  • This says it all... (Score:5, Interesting)

    by Anonymous Coward on Saturday April 20, 2013 @09:41AM (#43503221)

    The Blackstone Group has notified Dell's board that it has ended its bid for the company after performing 'due diligence' on Dell's books.

    They didn't like what they saw. Dell ran that company very lean and I bet that Blackstone couldn't figure out how to get the returns they want from any investment in that company. And since PC sales growth has stagnated, they couldn't count on expanding revenues and cash flows to support an obscene amount of leverage (ie debt) that these types of firms like to burden takeovers with.

  • Beware Icahn! (Score:5, Interesting)

    by Anonymous Coward on Saturday April 20, 2013 @10:09AM (#43503353)

    Well Icahn's still in the game, he's claims to offer $15 a share vs Dell's $13.65 per share, I don't like Icahn. He tried to scam Yahoo shareholders (inc me) by claiming a deal was worth more than it actually was.

    In the deal, he stripped Yahoo of all it's cash, handing it to shareholders, counted that money (the money we already owned) as money given by the Microsoft deal. He then added a loan from Microsoft which required Yahoo to pay it back with interest back to Microsoft. He counted that loan as income from the deal too. If a company CEO had done it, the SEC would be on him for fraud, but Icahn is a third party asset stripper and he's not obligated to be truthful about the value of a deal.

    "Icahn's offer, which was also submitted the day before the deadline expired, includes purchasing $2bn of the firm's shares at $15 per share, and offering $2bn of cash equity financing."

    So basically, Icahn is trying to buy only a portion of the shares (company is worth 22 billion), enough to scupper a full buyout. And there's the loan with interest.
    He tends to list those as income to pretend an inflated figure on a buyout value. Loans are loans, you pay them back with interest, they're not income, they're not part of a buy price. If the company doesn't need the cash, they're a charge on the company. If the loan on Dell is to pay Icahns buyout, that's a leveraged buyout and its not worth squat to existing shareholders.

    Dell shareholders, we Yahoo shareholders had bitter experience of that turd Icahn, you read his numbers very very closely, he tends to flat out lie in the summary about the true value of a deal. He didn't get rich by giving you his money. Classic games to watch out for: buying blocking positions to prevent a buyout, leverage buyout, buying a company by borrowing money against the assets of the company. Third party deals, e.g. agreeing with a competitor some gain if he poisons a company during buyout.

    If you don't understand what I mean, look at the Yahoo deal. That would have stripped Yahoo of cash, made it dependant on Microsoft for short term money and made their income also dependant on Microsoft. MS for its part promised to buy a portion of shares in the future at a higher price. The likely block of shares that referred to was Icahns block, I believe that was to be his reward for poisoning Yahoo.

    BEWARE!

  • by Anonymous Brave Guy (457657) on Saturday April 20, 2013 @12:54PM (#43504317)

    Not that I disagree with anything you said, but early Dell also had a reputation for quality in the days when the hardware/components industry hadn't consolidated as much as it has today, which parts you picked really did matter, and a lot of PCs suffered silly problems because of careless assembly. If you wanted a solid, reliable office PC, buying a Dell was about as safe a bet as you could place.

    At the same time, their reputation for customer service and after-sales support might not have been anything special, but it wasn't bad either. They provided a good level of customisation earlier than many suppliers, probably because of the flexible process you mentioned.

    Today, they've squandered both, with a succession of quality control problems and with lousy support and much hand-washing any time anything goes wrong. Apparently some of the equipment they make is still pretty good, when it works, but downtime can make a massive difference to the TCO for business equipment so that "when it works" is a serious drag on everything else they do, and much of what they make is nothing special anyway.

    That leaves Dell is much the same position as Cisco: a big name brand that is hoping businesses will still buy their high-priced gear because of the name on the front while somehow not noticing that what's inside the box often isn't very good these days and you might find a better business relationship elsewhere as well. Unfortunately for them, the "no-one ever got fired for buying IBM" strategy doesn't really work any more, at least not for long.

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