July 18, 2013

Dell delays vote on buyout, sign it lacks support

By David Koenig and Michael Liedtke / The Associated Press

(Continued from page 2)

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Michael Dell, who is Dell's CEO, is hoping to evolve the company into a more diversified seller of technology services, business software and high-end computers — much the way IBM Corp. had successfully transformed itself in the 1990s.

AP

Some analysts fear the stock will sink below $9 again if the deal with Michael Dell falls apart.

Michael Dell, the company's largest shareholder, is throwing in all of his stock and $750 million of his $16 billion fortune to help finance the sale to a group led by Silver Lake. Dell's stock-and-cash contributions to the deal are valued at about $4.5 billion.

Software maker Microsoft, which counts Dell among its biggest customers, is backing the deal by lending $2 billion to the buyers. The remaining money to pay for the acquisition is being borrowed through loans arranged by several banks, saddling Dell with more than $15 billion in debt that could raise doubts about its financial stability among its risk-averse corporate customers.

The sale is structured as a leveraged buyout, which requires the acquired company to repay the debt taken on to finance the deal. Dell's sale is the second-highest-priced leveraged buyout of a technology company, trailing the $27 billion paid for First Data Corp. in 2007.

The Dell story is now famous: A 19-year-old started a business in 1983 by selling computer disk drives from his dorm room at the University of Texas at Austin. Soon he was assembling computers and undercutting conventional retailers on price. He then raised $30 million by taking the company public in 1988. Dell went on to change the PC business with low costs, customized orders and direct sales — first over the phone and later the Internet. The CEO climbed the ranks of the richest Americans.

In 2004, when Dell stepped aside as CEO, sales topped $40 billion a year and were on their way to more than $60 billion. Dell returned as CEO in 2007, after the company had fallen behind Hewlett-Packard Co. as the world's largest PC maker and after it endured an accounting scandal that resulted in a $100 million corporate penalty and Dell himself paying $4 million. The company's stock is down by more than 40 percent from where it stood when Dell returned for his second stint as CEO.

Now 48, Dell is seeking to turn the company around away from the glare of Wall Street and the demand for short-term, next-quarter results that investors demand from public companies. He would build upon the company's recent efforts through acquisitions to get into more-profitable lines including business software, network security and consulting.

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