PC pioneer Michael Dell, corporate raider Carl Icahn and former Hewlett-Packard CEO Mark Hurd, who lost his job amid allegations of sexual misconduct, may each now be vying for the future of computer maker Dell, as millions of customers and thousands of jobs hang in the balance.
What started as a plan to take the world's third-largest computer maker private
has morphed into a high-stakes bidding war involving the biggest names in business takeovers and tech.
The latest saga also pits Stephen Schwarzman, CEO of private-equity giant Blackstone Group, mano a mano with rival directors at Silver Lake Partners, in
what is a PC buyout for the books.
Dell on Monday said it will review proposals from Blackstone and investor Icahn,
setting the stage for a battle against a group led by CEO Michael Dell -- the onetime tech wunderkind -- over ownership of the beleaguered PC maker.
Shares of Dell were up 2.6 percent to $14.51.
Dell is in tatters from its glory days as PC leader when its founder graced the covers of business glossies, trumpeted for his build-to-order business model
that reinvented the supply chain. Much has changed as personal computers have
been pushed aside as masses of consumers instead snap up smartphones and
tablets.
The resurrection of Dell -- and the sideshow of marquee players -- may leave
Dell a much different company but also much the same, industry experts say.
Dell's bid to reinvent itself in a move to go private comes after of years of
struggling in a low-margin computer business and lagging profits. Just ask
Hewlett-Packard. After Hurd left -- or was pushed out over sexual-conduct
allegations -- former CEO Leo Apotheker nearly spun out its PC business in
disastrous results to the anxiety of PC buyers and its stock.
Meanwhile, the world order of PCs, dominated by the likes of HP and Dell, is
facing a new mobile reality led by Google, Apple and Samsung. That's making such
a deal necessary.
"The PC business, in general, is amazingly insecure," says Atari founder Nolan
Bushnell, who hired Steve Jobs decades ago in computing's infancy. "If I were
Dell, I would just copy Samsung."
Dell 2.0 will likely serve consumers with a slimmed-down lineup of PCs and still
offer support, but don't expect a huge retail presence. For consumers, little
appears changed but a fact remains: Dell, and the man behind it, need a second
act. What that means for buyers of PCs is Dell will stick in business but it may
scale back its wares while it does some soul searching.
"I do think they will dial back consumer PCs," says IDC analyst Crawford Del
Prete, noting that customers should expect services to continue. "I think they
would significantly reduce their footprint at Best Buy."
Dell is generating about $3 billion a year of free cash flow and has more than
$12 billion of cash on hand. But there's "no saying how sustainable the $3
billion of free cash flow will be, so that is the key risk," says Richard Sloan,
a professor at University of California-Berkeley.
CONCOCTING DELL 2.0
About half of Dell's business comes from PCs, which don't promise fat profits.
"It's a very low-margin part of their business," Del Prete says.
Plans hang for Dell to go private and overhaul the company far from the scolding
gaze of Wall Street. That could allow for massive layoffs and restructuring as
