Partners Worry Dell Doesn't Have Votes It Needs To Save Itself


Dell CEO Michael Dell knows what's best for Dell, according to some of its partners. And many see Thursday's decision by the Round Rock, Texas, company to delay a buyout vote as a bad sign. Solution providers say they believe Dell's board delayed the vote until next Wednesday because the deal is falling apart. They fear if the votes don't go Michael Dell's way, activist investor Carl Icahn will take control, shake things up and oust Michael Dell.

"Icahn may be a Wall Street wonk when it comes to wealth management, but I don't see him as a technology visionary," said Bob Hochmuth, vice president of sales at SL Powers, a Boca Raton, Fla.-based VAR and Dell solution provider. Michael Dell has a vision for his company, he said, and "Icahn just has dollar signs in his eyes."

Over the past several months, Michael Dell and investment partner Silver Lake Partners have struggled to rally support of their plan to take the company private for $13.65 per share, or $24.4 billion. Icahn and Southeastern Asset Management partners have offered $14 a share and thrown in a warrant provision allowing shareholders to buy one share of Dell for every four shares they owned for a fixed price of $20 within a seven year period. Icahn argues that brings the value of his offer to about $15.50 to $18 a share.

[Related: Who Can Build The Best Dell: Carl Icahn Or Michael Dell?]

"I would be disappointed if [Michael] Dell's plan fell through," said Thomas Echevarria, CEO of Xatacom, a Dell partner. Echevarria makes the same point Michael Dell has made: Going private relieves Dell of the pressure of delivering short-term gains to Wall Street and allows it to focus on long-term chess moves to help Dell leap forward.

"The vote will be extremely close," said Roger Kay, principal analyst at Endpoint Technologies Associates, in an interview with CRN earlier this week. According to a report by The New York Time, as of Thursday about 77 percent of Dell votes had been cast with the exception of Michael Dell's shares.

Kay's assessment of what Icahn might do to Dell certainly won't make Dell partners feel any better. "Michael Dell will be able to redirect revenue growth and profits toward investment and focus on turning past acquisitions into one streamlined service. Icahn would take money off the balance sheet and pay it out to his investor friends." Kay said Icahn would squeeze money out of the company via layoffs and selling parts of the business.

Most all partners CRN has interviewed identify with Michael Dell, the entrepreneur they respect. They say CEO Dell, not Icahn, has more skin in the game to make Dell a success and has a superior understanding of the tech industry. Dell has suffered over the years as PC sales continue to plummet worldwide. Michael Dell says his company needs to focus on cloud and business services. Icahn has been tight lipped about what he would do if he wins control of Dell.

If shareholders vote to endorse Icahn's Dell financing terms, they agree to have Icahn replace Dell's board with 11 new members that work for Icahn and Southeastern Asset Management.

For Dell channel partner John Pucillo-Dunphy, an engineer at Miracle Networking Solutions, Middleboro, Mass.-based Dell partner, it's less about Michael Dell and more about what's right for his customers. "Going private will be the least disruptive to the channel," Pucillo-Dunphy said. He said drama at Dell's board will eventually trickle down to drama in the channel.

PUBLISHED JULY 18, 2013