Hi Ho the Derry-o, Headaches for Michael Dell

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You know it’s going to be an interesting day when you push the start button on your Dell (NASDAQ:DELL) tower, wait for your Dell monitor to come alive, you begin typing on your Dell keyboard and use your Dell mouse to direct your browser to the financial headlines that practically scream in your face that “Dell Profit Falls 72%.”  I’m just glad that my printer is an HP.

Dell share price is at $13.70 this morning, not really much off of where they have been during the month of August.  In fact, despite a spike here and a plunge there, here a chick, there a chick — oops, wrong nursery rhyme — Dell shares are pretty much where they were six months ago.  Which is why super-investor, Carl Icahn, is in court today to try to prevent Michael Dell from purchasing the company he founded 30 years ago in his dorm room.

Michael Dell’s offer of $13.65 per share was well-received by the board, but not so much by some shareholders as Icahn has made his accusations that Mr. Dell has been trying to keep the company in a position whereby the share price will decline or, at least, not go above the $13.00 mark.  In simple terms, the lower the share price goes, the greater the premium appears to be at $13.65 per share.

The foundation for Ichan’s argument is that Dell lost $5 billion in revenue in FY2012 and followed that with a 79% decline in first quarter earnings in FY2013.  You can be sure that he will be adding the 72% second quarter earnings to his argument before the court this morning.

Dell will argue that the company’s struggle is based on the need to transform the business under the sole control of its founder.  Michael Dell’s plan is much the same as Cisco’s (NASDAQ:CSCO) about which we reported yesterday.  He envisions redefining the company to focus on corporate clientle where there is a greater demand for solutions.  Icahn disagrees with that plan, as the competition is already entrenched in that market with the likes of IBM and HP.  He feels that the Dell name may not have enough strength or product offering to be a Johnny-come-lately to a battle that is already fierce.

The NASDAQ is now open in New York and the Dell share price has risen to $13.71.  It’s not making Mr. Dell’s offer of $13.65 very good at this point.



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