Carl Icahn, the activist investor* who has been providing the only alternative to Michael Dell's plan to take the IT company that bears his name private, has finally lined up the financing that he says will be necessary to acquire Dell at a higher price than Dell, the man, is offering. In a letter to Dell shareholders and the …
Has Carl got a driving license for this?
At least, Mike Dell knows how to run a computer company. Carl will just see stripable assets, expensive employees and some less than cost effective businesses, such as the cloud and PCs. Oh well!
Re: Has Carl got a driving license for this?
However, I think it is debatable whether or not Dell is that good at running a computer company. Yeah, it's a tough business, but it's not like all of us are going to be abandoning our computers anytime soon. Actually, I think the real point of this entire argument is that Dell wants to abandon computers via a path that the existing shareholders would refuse to support.
In other words, Dell the company is looking at an extremely rocky transition whatever happens. It's just that the blackmailer is also a skilled vulture capitalist who is convinced he can get more cash out of the corpse of Dell the computer company than Dell the man can.
I actually give Dell the man some credit for wanting to save the company with his name, but I don't actually have any strong reason to think that he still has enough entrepreneurial spirit to do it. Success is partly a matter of timing and luck, but age and energy are also important, and he's much older and less energetic than he once was, and whatever market he's planning to enter is not going to be free of competition. Then again, he will have the advantages of experience and a lot of start-up capital (except that, given the state of American and especially Texas law, I am expecting the blackmailer to win and suck all the capital out).
Carl's offer is...
Good for others (that aren't Dell) in the industry. There are a few, and a large one that I won't name (I work at one).
Yes, Carl's 'Driving license" is just a learners permit when it comes to actually RUNNING a company. He is very good at breaking it up and selling off pieces.
All of this brings uncertainty to Dell (the company) as a vendor. It doesn't matter who actually takes over the company, Dell customers will have the equivalent of a door open to the cold, and some of them will be shoved out (I really don't know who!). The customers won't like the cold draft, and might go to other vendors. Downhill spiral!
The problem with Ican's math
Is basically it borrows from Dell shareholders to pay for the deal. The only ones that will make money are those that jump ship, and there's a limited pool of cash for them to do that. Those that hold on to their shares better believe that Dell will still be about in 10 years time and making huge profits or they're going to lose out, and I'm pretty sure Ican isn't thinking that far ahead and Dell won't last that long.
Re: ...better believe that Dell will still be about in 10 years...
Agreed. And that's how to call the bluff: Make Carl put up a bond equal to the debt he said Dell the company should take on good for 25 years. If Dell the company subsequently goes bankrupt, it creditors can collect on the bond. I'd quit at 10, but they'd just time the raiding of the corpse if I did that. By setting it at 25 it has to be a workable deal.
the activist investor ...
While I appreciate el reg's earnest desire not to use the word 'vulture', the use of 'investor' is a similar abuse of language. I believe they had it right in the 80's when Icahn and his ilk were described as 'corporate raiders'