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.
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.