This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

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=""><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.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
DELL $0.00 0.00%
AAPL $93.74 0.00%
FB $117.58 0.00%
GOOG $693.01 0.00%
TSLA $240.76 0.00%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs