Michael Dell looks for post-buyout job guarantee

The CEO may be angling to stay on even if his own bid for the company doesn't succeed. His 15.6% stake could keep him around.

By Jonathan Berr Apr 1, 2013 12:58PM
Michael Dell, Chairman and CEO of Dell Inc., in October 2012 (© Lucas Jackson/Reuters)Can Dell (DELL) the company go forward without Dell the CEO? Many investors are willing to take that chance.

According to Bloomberg, Michael Dell may back Blackstone's (BX) bid for his namesake company if he's able stay as chief executive. This is surprising, considering that the CEO had partnered with Silver Lake, a rival to Blackstone, in its $22.4 billion leveraged buyout for the Round Rock, Texas, company. Dell, whose deal has been criticized by investors for undervaluing the company, also didn't inform Silver Lake about the discussions he has held with Blackstone. Billionaire Carl Icahn has also made a rival offer for Dell.

Michael Dell owns a 15.6% stake in the company he founded more than two decades ago in his University of Texas dorm room. If one of the buyers wants to oust him, he'll "cash in his shares and walk away, leaving the buyer to replace about $4.5 billion in financing he could have contributed," Bloomberg says. Basically, Dell would take his ball and go home.

When he returned to lead Dell in 2007, the PC maker was floundering after losing its top spot in the PC market to Hewlett-Packard (HPQ) and was mired in an accounting scandal that led to it restating earnings for the 2002 to 2006 fiscal years. In 2010, Dell paid a $100 million penalty related to the matter. Michael Dell personally paid a $4 million fine without admitting guilt. Since then, the company has continued to struggle.

Under Michael Dell's leadership, Dell seemed to miss most of the major trends in technology for the past decade. In the fiscal year ended Feb. 2, 2007, Dell earned $57.4 billion in revenue. In fiscal 2013, the figure slipped to $56.9 billion.    

According to a recent SEC filing, Dell has missed its own internal projections in each of the past seven quarters. The company now is focusing on providing info-tech services to business, a strategy that's showing some promise. Dell's most recent earnings were so much better than expected that it undercut its argument for a leverage buyout.

In the heady days after he came back to Dell, optimism was high that Michael Dell could help the company regain its lost mojo. When The New York Times asked him how long he planned to stay, the CEO said for a "long time."

"Hey, we’ve got a lot of work to do and we’re just getting started," he told the paper.

Now, it's not clear whether he'll be able to complete whatever it is he was trying to start.

Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter @jdberr.


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