Post-PC era spooks Blackstone into dropping Dell bid

Summary: Blackstone said the collapse in PC sales was enough to make it rethink its bid for Dell.

Blackstone's lack of confidence in Dell's ability to compete in the post-PC era led the private equity firm to drop its bid for the company.

Dell confirmed that Blackstone withdrew its offer. CEO Michael Dell and Silver Lake Partners announced plans to take Dell private. Shareholders balked. Blackstone entered the running for Dell and then was joined by Carl Icahn in the bid for a better deal for shareholders.

But Blackstone's master plan was thwarted by the worst decline in PC sales in a generation. Blackstone's letter says it all:

You have asked for an update of our views after the intensive due diligence that we just completed. While we still believe that Dell is a leading global company with strong market positions, a number of significant adverse issues have surfaced since we submitted our letter proposal to you on March 22nd, including: (1) an unprecedented 14 percent market decline in PC volume in the first quarter of 2013, its steepest drop in history, and inconsistent with Management’s projections for modest industry growth; and (2) the rapidly eroding financial profile of Dell. Since our bid submission, we learned that the company revised its operating income projections for the current year to $3.0 billion from $3.7 billion.

Bottom line: Blackstone felt that Dell's transformation plan, which revolves around software and services and an expanding data center hardware footprint, couldn't outrun PC sales. The larger question is whether Carl Icahn feels the same. 

Previously:

Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic.

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Blackstone drops out of the race to bid for Dell

Private equity investment firm Blackstone Group has ended its plans to counteract a buyout offer from Silver Lake and Michael Dell, less than a month after the company's intentions were made public.

Blackstone planned to buy the majority of Dell's remaining stock for $14.25 a share in order to compete with a buyout offer led by private equity firm Silver Lake and the PC maker's founder Michael Dell, according to the Associated Press. The latter's offer stands at $24.4 billion, at the time made on a share-price premium, but left a number of shareholders less than appeased.

Dell confirmed that Blackstone dropped out. 

Outside investors including Southeastern Asset Management and T. Rowe Price have vehemently opposed the deal. Shareholder Catherine Christner has taken the matter further, filing a complaint with Delaware Chancery Court alleging that Dell's board of directors have breached their fiduciary duties, and Silver Lake has "aided and abetted those breaches."

The disgruntled shareholder also claims that Michael Dell has "abused his position as CEO," and the PC maker is being bought "on the cheap."

Michael Dell -- who owns a 15.7 percent stake in the company -- wants the firm to go private. This means that not only will financial statements be denied to Wall Street, but the control of future business strategy will be stripped from investing parties.

If Blackstone's plans had come to fruition, then a higher proportion of the company would have remained in the hands of public shareholders, an important factor as the deal requires majority approval from shareholders excluding the PC maker's founder.

The private equity firm's offer of $14.25 a share trumps the founder and Silver Lake's $13.65 per share valuation, but if reports prove sound, the loss of a bidder will have to be disclosed in coming days by Dell management.

A bidding war could still take place, as investor Carl Icahn has also submitted an offer of up to $15 per share for 58 percent of Dell's stock, and Dell's CEO may in turn counter with a higher bid; a situation which can only benefit shareholders who feel that if the firm goes private, they will not be able to reap the rewards of the company's awaited recovery.

Michael Dell believes that the PC maker could do well in the tablet and cloud computing markets. As the PC market continues to deteriorate -- worldwide shipments sliding 14 percent in the first three months of 2013, according to Gartner -- the world's third largest maker of PCs will need to adjust to the times. However, the company's founder does not believe this can be achieved, considering Wall Street's fixation on short-term results, if Dell continues its 25-year stint as a publicly-trading company.

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Post-PC era spooks Blackstone into dropping Dell bid

Summary: Blackstone said the collapse in PC sales was enough to make it rethink its bid for Dell.

Blackstone's lack of confidence in Dell's ability to compete in the post-PC era led the private equity firm to drop its bid for the company.

Dell confirmed that Blackstone withdrew its offer. CEO Michael Dell and Silver Lake Partners announced plans to take Dell private. Shareholders balked. Blackstone entered the running for Dell and then was joined by Carl Icahn in the bid for a better deal for shareholders.

But Blackstone's master plan was thwarted by the worst decline in PC sales in a generation. Blackstone's letter says it all:

You have asked for an update of our views after the intensive due diligence that we just completed. While we still believe that Dell is a leading global company with strong market positions, a number of significant adverse issues have surfaced since we submitted our letter proposal to you on March 22nd, including: (1) an unprecedented 14 percent market decline in PC volume in the first quarter of 2013, its steepest drop in history, and inconsistent with Management’s projections for modest industry growth; and (2) the rapidly eroding financial profile of Dell. Since our bid submission, we learned that the company revised its operating income projections for the current year to $3.0 billion from $3.7 billion.

Bottom line: Blackstone felt that Dell's transformation plan, which revolves around software and services and an expanding data center hardware footprint, couldn't outrun PC sales. The larger question is whether Carl Icahn feels the same. 

Previously:

Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic.

View the original article here