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Proposed $24.4B sale looms over Dell's earnings

Published on NewsOK Modified: February 14, 2013 at 3:38 pm •  Published: February 14, 2013
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ROUND ROCK, Texas (AP) — Dell's fiscal fourth-quarter report is expected to show why the struggling personal computer maker wants to end its 25-year history as a public company.

WHAT TO WATCH FOR: The results, due out after the stock market closes Tuesday, are being released two weeks after Dell Inc. announced it plans to sell itself for $24.4 billion to founder and CEO Michael Dell and a group of investors led by Silver Lake.

Michael Dell and his backers are betting the Round Rock, Texas, company will be better off trying to diversify its business beyond the PC market without facing Wall Street's pressure to boost earnings from one quarter to the next.

The numbers for the three months ending in January are expected to show Dell's revenue declined from the previous year for the fourth consecutive quarter. The latest drop could be the biggest so far, based on analyst forecasts calling for a 12 percent decrease.

The slump stems from weakening demand for PCs as more technology spending shifts toward smartphones and tablet computers. The challenges caused by that shift caused disillusioned investors to dump Dell's stock, which stood at about $24 in early 2007 when Michael Dell returned for a second stint as the company's CEO.

Dell's shares sagged to as low as $8.69 three months ago. By then, Michael Dell had already approached the company's board about his interest in engineering a buyout with other investors. The board set up a special committee last August to explore the possibility and negotiated with three suitors before settling on a proposal that will pay existing stockholders $13.65 per share.

Michael Dell is contributing about $4.5 billion, including his 14 percent stake in the company, to get the deal done. The rest of the money is coming from Silver Lake and about $15 billion in loans from Microsoft Corp. and a consortium of banks.

Although the proposed sales price is a premium from where Dell's stock had been stuck at, the company's two largest shareholders behind Michael Dell don't think it's high enough. Southeastern Asset Management and T. Rowe Price, which combined own a nearly 13 percent in the company, already have vowed to vote against the proposed sale, and other shareholders are expected to join the uprising.

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