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Topic: Dell

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.

Larry Dignan

By for Between the Lines |

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.

dellpc

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:

Topics: Dell, Hardware, PCs

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26 comments
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  • Blackstone may regret their action

    Either Dell or the PC industry itself may revive sooner than many believe. The 'Post-PC Era' is overstated in my opinion. In any case, it may not be long before we'll hear talk of 'The Post-Tablet Era', the 'Post-Smartphone Era', and the 'Post-Apple Era' when the next wave of new devices comes along.
    preilly2@...
    Reply 4 Votes

    • Re: ...may revive sooner than many believe

      In other news, the Titanic may revive and continue its much-delayed maiden voyage sooner than many believe.
      ldo17
      Reply 3 Votes

      • Dominant devices come and go

        The PC will probably never have the dominance it once did. But someday, the Next Big Thing will push smartphones and tablets as well into a decline. The point is that we may not see any of these devices actually disappear, just be forced to accept a smaller and smaller share of a finite market. Who's to say Dell won't be involved in the next generation of successful devices?
        preilly2@...
        Reply 3 Votes

        • define 'success'

          Free of ANY market interference, taxpayer-funded handouts, free of any unethical or predatory actions to kill competition, etc...

          Good luck.
          HypnoToad72
          Reply 1 Vote

      • Hey, what do you know...

        "In other news, the Titanic may revive and continue its much-delayed maiden voyage sooner than many believe."

        http://www.usatoday.com/story/travel/cruises/2013/02/26/titanic-ii-will-be-built/1948935/

        I'm glad you agree that PCs are on the comeback!
        SlithyTove
        Reply 3 Votes

        • Re: titanic-ii-will-be-built

          So all we need to do is wait for a "Microsoft II" corporation to come along, and develop a new "Windows II" OS for the "PC II" platform, then we can say that PCs are on the comeback!
          ldo17
          Reply 1 Vote

    • Agreed. They were likely spooked by Carl Icahn himself

      as Apple did a good job of "re-inventing" itself in the :post PC world", who say other companies won't?
      William Farrel
      Reply 4 Votes

      • Except Dell is not an Innovator

        Never has been, never will be and certainly won't be going forward.

        Say Dell to someone and they immediately think $hitty computers, poor service, and junk.
        itguy10
        Reply 1 Vote

        • Dell's actually pretty decent.

          Have you seen their Latitude machines lately?

          They're all excellent.
          ForeverCookie
          Reply 4 Votes

          • He HATES Dell

            So he imagines everyone else thinks the same thing.
            William Farrel
            Reply 3 Votes

        • It's not about innovation. It's about patenting the ability to innovate.

          Had Xerox done it 30 years ago, Apple would have been exterminated.

          Like how Apple is trying to exterminate Samsung, for... why effectively doing the same thing Apple did all those decades ago.
          HypnoToad72
          Reply 2 Votes

          • Interestingly enough, I read something on that this morning

            Basically saying that Apple could learn something form MS

            "a need for Apple to diversity itself away from relying so heavily on iOS, develop and build alliances with other companies (not tear them down like it's doing with Samsung), and spend less time and energy on legal battles over patents."

            So you've hit on something others are starting to see themselves.
            William Farrel
            Reply 1 Vote

          • Sorry - it went on to say

            "For me, the one thing that has remained constant for Microsoft but that Apple has seemed to abandon in recent years has been product innovation."

            "While Redmond gives its new innovations a fair shot to produce sales numbers, Apple has recently been on a dizzying production cycle where it tries to roll out a new device every few months, and a new OS nearly every year. In this writer's humble opinion, focusing on quantity of products in the market or the speed in which they are produced takes away from the focus on innovation. Yes, Apple was the leader in tech innovation, but that was when Apple looked to make devices that were truly new and different from their predecessors, not just updates from the fall because now it's spring.

            If Apple wants to return to its innovative ways, it likely could take from the Microsoft model in this way - slow down. Once a device is introduced, don't put out a new version until it is truly a new version. Let the level of innovation dictate the production schedule. Apple has succeeded for 30 years because it has been different from Microsoft in the ways Satell wrote - but it was successful like Microsoft due to the similarity in focus on innovation. When Apple diverged from that, it lost its edge."
            William Farrel
            Reply 1 Vote

    • Dell is on the right track

      and they only need to continue being more innovative with their mobile device offerings and leverage their enterprise presence to explore the BYOD space.
      dugbug11
      Reply 1 Vote

      • More innovative with their mobile device?

        Yeah, they've been so innovative in the mobile space their smart phones and tablets are selling like hotcakes. Selling so lightening fast that they can't keep it on store shelves for us to notice it. So innovative they're actively seeking a bidder.
        dave95.
        Reply Vote

    • I call BS

      Nothing has changed in the PC industry since Blackwater (sorry, Blackstone) started this whole processes. I really think there is something that stinks to high heaven in stock manipulation to this mess but this is how the overlords operate.
      Rann Xeroxx
      Reply Vote

  • Icahn

    "The larger question is whether Carl Icahn feels the same. "

    Actually, no. Carl does not give two figs for Dell's long term prospects.

    He is interested in two things: How much cash the company has on hand, and the maximum limit of debt that it can acquire on short notice so that it can fork both over to Carl.

    Whether Dell is still alive as a company in two years is irrelevant to his plans.
    SlithyTove
    Reply 4 Votes

    • Ditto

      Yep... that's about it.
      noibs-0cf43
      Reply 2 Votes

    • He may also be interested...

      ...in punishing publicly held corporations that try to go private (by drawing down their cash reserves and pushing them into high indebtedness). The trend is really not a good thing for corporate raiders like Icahn, or the speculators with whom he is usually allied, so it's logical for him to resist it, as long as the price isn't too high.
      John L. Ries
      Reply Vote

  • Shut it Down!!!!

    In the words of Gordon Ramsay "SHUT IT DOWN!" We won't miss the vendor of POS computers at all!
    itguy10
    Reply 1 Vote
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