Dell Outlines Reasons for Current Mess in Proxy Statement

Maximum PC Staff

Blames ‘uncertain’ Windows 8 adoption and ‘unexpected’ decline in Windows 7 enterprise upgrades

Beleaguered PC vendor Dell has recently been in the news mainly for CEO Michael Dell and Silver Lake Partners’ $24.4 billion ($13.65 per share) buyout offer and all the attendant drama . On Friday, came the latest chapter in the Dell buyout saga as the company filed a 274-page preliminary proxy statement with the U.S. Securities and Exchange Commission.

Besides all the corporate drivel one would normally associate with a lengthy “proxy statement pursuant to Section 14(a) of the Securities Exchange Act of 1934”, the document also lists a number of possible causes for the world’s third largest PC vendor’s current ailment.

Most, if not all, of the factors cited in the document, which seeks stockholder approval of Michael Dell’s proposal to take the company private, are problems a number of other top PC vendors will be able to identify with.

Some of the things cited in the document as being responsible for the precipitous decline in Dell’s PC business are:

  • Poor economic climate (and consequently lengthening replacement cycles)
  • “Uncertain” adoption of Windows 8
  • “Unexpected” slowdown in enterprise upgrades of Windows 7
  • PC market’s increasing unpredictability
  • Intense downward pricing pressure and the rise of commoditization in the PC market
  • Company’s near absence from the highly popular smartphone and tablet segments.

The proxy filing reveals that Michael Dell outlined a number of “strategic initiatives” in a presentation he made to the company’s board on December 6, 2012 on the merits of going private. These include focusing on the enterprise segment, significantly expanding the company’s sales force, expanding in emerging markets, and taking the tablet business more seriously.

“Mr. Dell stated his belief that such initiatives, if undertaken as a public company, would be poorly received by the stock market because they would reduce near-term profitability, raise operating expenses and capital expenditures, and involve significant risk,” the proxy statement says.

The proxy filing also notes that the company has received two non-binding alternative acquisition proposals. One of them is a $15 per share offer from Carl Icahn and another one is an offer of an unspecified amount in excess of $14.25 per share from Blackstone Management Partners.

“Michael Dell has confirmed his willingness to explore participating in alternative acquisition proposals. However, there can be no assurance that either non-binding alternative acquisition proposal will ultimately lead to a superior proposal,” the company said in a press release Friday.

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