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Michael Dell's Conflict of Interest Will Hurt Shareholders

NEW YORK ( TheStreet) -- It seems utterly pointless to discuss another earnings report from Dell (DELL). The beleaguered tech giant logged another earnings miss and not even the magnitude of the company's 72% profit decline registered on any performance scale.

Investors have become numb to the idea that there's still a story here.

What's unclear is Dell's underlying value. It's been eight months since Michael Dell, along with Silver Lake Partners, offered of a proposal to take Dell private at a price of $13.65 per share, which valued the deal at $24.4 billion. I thought this was a suitable offer for a company that has grossly underperformed over the past five years. The stock, as you would expect, has flat-lined ever since.

However, with the company hemorrhaging revenue, earnings and market share each quarter, it's anyone's guess as to what Dell is truly worth. Activist investor Carl Icahn, who has been in a tug-of-war with Michael Dell over the company's ownership, thinks he knows how to realize that value. Given the performance of Icahn's investments to date -- a portfolio that now includes Apple (AAPL) -- I tend to believe him.
[Read: <a target="blank" data-add-tracking="true" href="http://www.thestreet.com/story/12010402/1/risk-is-not-a-four-letter-word.html"><em>Risk Is Not a Four-Letter Word</em></a>]

Dell has had plenty of time to adapt to the dominance of Apple and Samsung in the rise of mobile devices. Not only has the company failed miserably, but there's been no real attempt to mount a response. As I've discussed recently regarding BlackBerry (BBRY), I don't foresee how a privatized Dell will emerge in better shape than it is today. Nevertheless, on the heels of another brutal second-quarter report, today there's no place to hide.

Due to the company's overreliance on a dying personal computer industry, Dell couldn't even meet Street profit estimates, which were already lowered to $275 million. Interestingly, though, this awful quarter may actually work in Michael Dell's favor. He's been adamant about how Dell has no other recourse that the path that he and Silver Lake Partners have chosen. Icahn disagrees.

Essentially, had the company posted better results, this would have fueled the flames of Carl Icahn, who insists Dell can still perform for its investors with better management. So, oddly enough, with a 72% decline in profits, Michael Dell's $24.9 billion privatization proposal looks a bit more appealing to frustrated investors, who, by not accepting, risk further financial decay.
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