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Shareholders voting on $24.4 billion Dell buyout

Thursday - 7/18/2013, 9:14am  ET

FILE - In this Wednesday, Nov. 14, 2007 file photo, Dell CEO Michael Dell smiles at Oracle Open World conference in San Francisco. Dell Inc. is making a late push to win shareholder support for founder Michael Dell’s plan to take the slumping computer maker private, an indication that the scheduled vote, Thursday, July 18, 2013, could be close. Supporters of the $24.4 billion buyout believe Dell Inc. stands a better chance of turning around if it can make long-term strategic decisions without worrying about meeting Wall Street’s quarter-to-quarter expectations. (AP Photo/Paul Sakuma, File)

DAVID KOENIG
AP Business Writer

ROUND ROCK, Texas (AP) -- Dell shareholders are voting Thursday on founder Michael Dell's plan to take the slumping computer maker private in hopes of engineering a turnaround away from Wall Street's glare.

In a sign that the vote could be close, a special committee of the company's board sent a letter to shareholders emphasizing its opposition to a rival plan from activist investor Carl Icahn. Dell Inc. also said Thursday's meeting could be adjourned quickly without a formal vote to give the board more time to round up support for the $24.4 billion buyout offer from Michael Dell and other investors.

The vote was scheduled at a special shareholders meeting at the company's headquarters in Round Rock, Texas.

Supporters believe Dell Inc. stands a better chance of turning around if it can make long-term strategic decisions without worrying about meeting Wall Street's quarter-to-quarter expectations. But some big investors have already signaled opposition to the bid. Icahn believes the offer undervalues the company.

The company's decision to go private is a reflection of the tough times facing the personal computer industry as people delay replacing traditional computers and spend their money instead on the latest smartphones and tablets. PC sales have been falling, and tablets are expected to outsell laptops this year.

Michael Dell, who is Dell's CEO, is hoping to evolve the company into a more diversified seller of technology services, business software and high-end computers -- much the way IBM Corp. had successfully transformed itself in the 1990s.

On Tuesday, Dell's special committee said Icahn could have trumped the Michael Dell group's $13.65-per-share offer, but instead submitted a recapitalization plan that it called risky and short on details. Icahn's plan calls for rewarding shareholders with some cash now, but leaving about a third of the shares outstanding for shareholders to benefit from a successful turnaround. Icahn and his Southeastern Asset Management fund own a combined 13 percent of Dell.

"I believe it's a very, very close vote," said Patrick Moorhead, a technology analyst in Austin. "Institutional investors usually let a company know where they stand, so you can imagine a war room where (Dell advisers) are counting votes."

In corporate elections like this, shareholders can change their vote right up to the last minute. Michael Dell's task is made more difficult by an agreement that he would not cast his shares, which represent about 16 percent of the company's stock. That means the board needs slightly more than 42 percent of Dell's outstanding stock to accept Michael Dell's offer to get the deal done.

If Dell delays the vote because it doesn't have enough support, analysts say Michael Dell's group might sweeten his offer.

In an open letter released Wednesday, Icahn called for a vote Thursday regardless of the outcome: "Can you imagine a political election contest where one side could push off the election to wait for a better day to hold the election -- a date when it is hoped they might do better in the vote than they would have done on the originally scheduled election date?"

It would have been hard to imagine the company bearing Michael Dell's name facing this situation a decade ago, when it was riding high and leading the world in PC sales.

That was before the shift in how people engage with technology. Although the company has branched out into servers, storage devices and services, it is still heavily dependent on PCs and has suffered from the rise of smartphones and tablet computers. Last week, research firm IDC said worldwide PC shipments fell 11 percent in the April-June period, compared with a year earlier. That followed a 14 percent decline in the first three months of the year, the steepest quarterly drop since IDC started keeping records in 1994.

Dell shares have never recovered from their split-adjusted peak of nearly $60 during the dot-com boom in 2000. They were at a three-year high of around $18 in February 2012, when they started sliding again in the face of weakening PC shipments. Michael Dell began talking with potential partners about a private buyout even before the shares hit a low of $8.69 in November.

Rumors of a deal sent the shares higher before the board announced the agreement with Michael Dell and other investors on Feb. 5. A four-member special committee of the Dell board recommended that shareholders take the buyout, saying that it minimized their risk and gave them an all-cash payment at a premium over the share price before news of a possible deal leaked.

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