Sept. 13--Michael Dell gave an upbeat outlook for his company on Friday, a day after shareholders approved a $24.9 billion buyout by the CEO and his financial ally, Silver Lake Partners, of the computer company named for him.
"We're playing offense, we're on the attack, we're growing, expanding our share," Dell told CNBC in a televised interview. "That is the Dell that many of you are very familiar with and you're going to see it in all of its glory."
Dell said his company will focus on building its enterprise computing business, increasing its sales force and its training, developing more private cloud computing solutions, selling more personal computers and tablets and "investments to enhance the customer experience."
He noted that Dell Inc. has plenty of room to grow because it is part of a $3 trillion-plus information technology industry and presently has less than a 2 percent share of that spending.
Dell Inc., he said, won't make smartphones, but it might resell smartphones made by other companies.
The company appears to be making a push to gain ground it the tablet computer market, which is expected to exceed the global personal computer market in total sales in the fourth quarter. Dell Inc. showed off a new Windows-based Venue tablet at a trade show this week in San Francisco. It expects to launch the product family in October.
While Michael Dell was upbeat Friday, credit rating agencies are more somber about the buyout of the company, which is expected to be completed in October.
Gimme Credit, a rating agency, maintained its "sell" recommendation on Dell Inc.'s existing debt, it said Friday.
"Dell is likely to be plagued by lackluster revenue growth, weak (profit) margins and enormous leverage," concluded analyst Dave Novosel.
The analyst noted that Dell Inc. has expanded its sales of servers, but faces increased pressure from its PC business and it remains a weak player in tablets.
"Our contention all along has been that Dell will need to pour more cash into investment initiatives to steer the business in a new direction," Novosel wrote. "We expect leverage (corporate debt) to remain high for an extended period of time."
Moody's Investors Service and Standard & Poor's have moved their ratings for Dell Inc.'s debt below investment grade.
Moody's projects Dell Inc.'s total debt will exceed $18 billion when the buyout is concluded.
"The increased debt burden will limit Dell's financial flexibility, potentially hindering the company's ability to transition more of its business to the faster growing and potentially more profitable enterprise solutions," its report said.
It expects Dell Inc. will create new cost savings of more than $2.5 billion a year and it will limit its spending on new business acquisitions to between $500 million and $1 billion annually. It projects that the company's expected cash flow of about $2 billion a year will be adequate to handle the servicing of its increased debt load, especially since Dell Inc. will no longer have to spend about $1.4 billion a year on dividends and stock buyback programs as it has since 2009. It also expects Dell Inc. will use some of its existing cash to pay down its debt burden.
Dell Inc. is the largest private employer in Central Texas, with about 14,000 workers here.
Shareholders have approved the Michael Dell-led buyout of the company -- and that means now the real hard work starts for Dell Inc.'s leadership as they try to reshape the computer maker. Technology writer Kirk Ladendorf takes an in-depth look at the challenges ahead for Dell Inc. in the Business section of Sunday's American-Statesman.
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