Tag: Icahn

Ebay does deal with Icahn

Faustian_BargainOnline auction outfit Ebay has done a deal with its activist investor Carl Icahn that will give investors a greater say in its PayPal payments unit once it is spun off.

Ebay said it exploring a sale or public offering of its enterprise unit.

The deal clears the way for a future buy  of eBay and PayPal by companies looking to gain a foothold in the e-commerce and online payments markets. Alibaba, Google and Amazon could all be interested.

Meanwhile Ebay is going to cut its workforce by seven percent, or 2,400 jobs, in the current quarter. While the company is making a pile of money, its outlook for the 2015 first quarter and full year fell short of what the cocaine nose jobs of Wall Street expected, so its workers will have to pay the price.

The planned job cuts will be across the board in all parts of the company except the board. Payments and enterprise divisions will be hit, eBay said. Restructuring and separation costs are expected to be between $210 million and $240 million in the first quarter and $350 million to $400 million for the entire year.

Also under the deal with Ichan, Icahn Capital executive Jonathan Christodoro was named to eBay’s board. He will have the ability to transition to PayPal’s board once the spin-off occurs.

Two Wall Street bankers has been added to its board, because you always need a board full of bankers.

PayPal agreed to adopt a number of measures proposed by Icahn, which the billionaire said enhance corporate governance at the fast-growing payments arm. The provisions are intended to give shareholders a larger voice in important decisions, particularly an acquisition bid.

They include a provision that any “poison pill” designed to ward off acquisition attempts be ratified by stockholders or expire after 135 days, and that holders of 20 percent of its shares be allowed to call a special meeting of stakeholders.

EBay plans to split its marketplace division from PayPal in the second half of this year. PayPal will be a standalone publicly traded company, which some analysts say will be worth $40 billion.

 

Apple could be worth double

two-applesA man who owns rather a lot of shares in the fruity cargo cult Apple, claims that they are undervalued and wants them to go up a bit.

Billionaire activist investor Carl Icahn said Apple) shares could double in value if it used its $133 billion cash pile in a buy back scheme.

In an open letter to Apple’s board, Icahn said Apple was dramatically undervalued in today’s market, and the more shares repurchased now, the more each remaining shareholder will benefit.

Icahn who said he would be hanging on to his own stock out of any repurchase claimed that Apple stock should be trading at $203.

“At today’s price, Apple is one of the best investments we have ever seen from a risk reward perspective, and the size of our position is a testament to this. This investment represents the largest position in our investment history,” Icahn wrote.

Icahn urged Apple to buy back as much as $100 billion in stock and said he hoped other investors would also press for a buyback.

In June Apple split, its stock seven for one and in April it raised its share repurchase authorisation to $90 billion from the $60 billion announced a year earlier.

Shareholders did not seem that impressed. Apple shares rose less than one percent in early trading to $101.49 but slipped to $100.84 later. The stock has gained 25 percent since January.

Icahn owns 53 million shares and is one of the iPhone maker’s top 10 investors so he will get back a huge amount if the share price doubles. Needless to say he has been urging the company to buy back more shares and raise its dividend.

We would take all this with a pinch of salt. In his letter, he said he expects the Apple Watch, the company’s first new product category since the iPad in 2010, to boost the company’s growth and suggested that television is another large opportunity for the company, which is more than anyone else believes.

Apple has long signaled it will not be pressured into making hasty decisions. On Thursday, spokeswoman Kristin Huguet declined to comment directly on Icahn’s letter but said “We always appreciate hearing from our shareholders.”  We are sure she does.

Dell profit falls by 72%

Dell logoDell has been in the news for all the wrong reasons lately. The company is embroiled in a protracted battle between CEO Michael Dell and celebrity investor Carl Icahn, who doesn’t want the company to go private. As a result of Icahn’s grandstanding, practically every Dell headline over the last few months had more to do about Icahn and his supporters than the company itself.

Business is not going well, but thanks to the mess, nobody seems to be paying much attention. On Thursday the company reported a 72 percent dip in quarterly earnings and flat revenue. The results were predictable, as practically every PC maker that’s not Lenovo is struggling.

Net income was $204 million, down 72 percent year-on-year. Revenue was flat at $14.5, but it still managed to beat Wall Street’s estimate of $14.18 billion. Dell’s net income was 25 cents per share, a penny better than expectations.

Last quarter Dell shipped 8.98 million PCs, down from 9.35 million a year ago. Dell still ranks as the third biggest PC seller with a 12 percent share. Lenovo and HP have slightly over 16 percent of the market each.

There were some bright spots, too. Enterprise computing revenue was $3.3 billion, up 8 percent year-on-year. Sales of networking hardware and servers were also up.

Ironically, the downturn could benefit Michael Dell in his ongoing row with Icahn. Icahn still insists that Dell is trying to buy the company for less than it’s really worth, but if the PC market keeps underperforming, Icahn might be about to run out of arguments.

Dell vote deal could get Dell Dell

dellsigTinbox supremo Michael Dell and buyout partner Silver Lake may well be reaching a deal with Dell’s special board committee to increase the price they’d pay – as long as the voting rules are tinkered with to make sure they win.

People familiar with the matter told the WSJ that Dell’s new deal isn’t done yet but if it were to go through, the per-share price would be bumped up from $13.65 to $13.75, as well as include a special dividend for shareholders.

The vote is set for today. But if Dell and Silver Lake successfully convince the committee to modify the voting rules, the shareholder vote could be staggered by as long as one month.

According to the WSJ, the change to voting rules would make it so only shares that are actually voted count. As it stands, abstentions count as a “no”.

It is possible with a change to the rules the deal could well pass. But it will upset top shareholders such as Carl Icahn, himself gunning for control over Dell, who started dragging Dell through the courts as of yesterday about the change.

Market struggle leads to Dell on Earth

Michael DellDell’s quarterly net profit has slipped 79 percent as the company endures the struggle to see who will carve up the majority share and in which direction it will be taken.

That sounds rather dramatic, but in reality the company is still worth a heap. Total revenues for fiscal Q1 2014 were $14.1 billion.

In a prepared statement, Dell CFO Brian Gladden said the company had made progress in building its enterprise offerings and is “confident in our strategy to be the leading provider of end-to-end scalable solutions”. Additionally, Gladden said the company has been taking actions to improve Dell’s competitive position. “We’ll also continue to make important investments to support our strategy and drive long-term profitability” – more shopping?

Enterprise Solutions Group had revenues of $3.1 billion, a ten percent increase on the previous quarter, with a 71 percent boost in operating income at $136 million. Dell Services enjoyed two percent growth to $2.1 billion and an 11 percent increase in revenues from infrastructure, cloud and security services. Support and deployment also grew two percent, but applications and business process services dropped 15 percent. Operating income grew 10 percent to reach $370 million.

Dell software saw an operating loss on the back of $295 million in revenues. However, Dell believes this segment is “on track to be accretive” to earnings for Q1 fiscal 2015. End user computing declined nine percent, with revenues at $8.9 billion for the quarter. Desktop and thin client revenues dropped two percent, mobility declined 16 percent, and software from third parties and peripherals declined six percent.

PC sales plunged nine percent but in fairness, this is expected. The entire world is in a slump and, although Dell offers some kit at the low end of the market, no one’s really buying.

However, Dell did point out that new technologies revenues as well as services and software gained a 12 percent boost, to reach $5.5 billion.

Tin-box enterprise supremo and founder Michael Dell really wants to gain a majority share in the company so he can take it off the public market and shift it in a new direction – some whispers suggest the way of IBM, discarding a burdensome consumer unit and focusing fully on enterprise, services and related businesses. Michael Dell’s proposed buy-out, along with Silver Lake, is just short of $25 billion.

Shareholders Carl Icahn and Southeastern Asset Management are trying to wrangle the company back from Mike and Silver Lake’s grip, insisting that the valuation is peanuts and investors should get much more for their buck. They are making their own proposals for the company, in a power struggle which has been ongoing for months.

Dell did not issue a company outlook, citing the announcement for a merger agreement to take Dell private as the reason.

 

Dell could go down like Richard III

Battle_of_BosworthTin-box shifter Michael Dell has found himself in the middle of a three-way proxy war for control of his company and might go out like Richard III screaming for a horse and ending up under a carpark.

Dell hit the headlines by allying with Silver Lake in a bid to take his company private. Really, that should have been the end of matters. Dell owns a big chunk of company stock, he founded the company in the first place and it desperately needs a restructuring.

Shareholders should logically be pleased to see a return on their cash at all, as the value of the outfit is likely to get a lot worse before it gets better, if it gets better. For some reason they are not.

Instead we are seeing the various big shareholders ganging up to try and take control before Dell can get the company private.

The question is what they hope to gain. In the middle of a recession, where Dell’s traditional buyers are saving their pennies, the company is paralysed. The only part of the IT industry that is moving at all is the mobile sector and Dell is not a big player there. Dell is doing alright in enterprise.

Logically a company in Dell’s position should restructure, cut back to basics and survive on its cash reserves until things pick up.

This is the opposite of what shareholders want. They want the company to show continual growth so that the share price will increase. By going private, Dell is protected from the wrath of shareholders and can look to the longer term.

While all sides are talking about having the best interests of the company and shareholders at heart, it is fairly clear that the only one who really cares about Dell as an ongoing concern is Michael Dell himself.

Blackstone, Carl Icahn, and Silver Lake Partners all have ideas to take the company private. But their idea can only be to take over and flog off all the company assets and distribute the last of the cash.

This can be the only reason why they are swarming around Dell like flies.

Otherwise any observer who lifts the bonnet of Dell has to take a sharp intake of breath and admit that in the short term Dell is buggered. Its core business market is rotting and its quarterly sales in its consumer sector are sliding.

A management plan presented to the board last July expected $5.6 billion in operating income this year. That was later reduced to $3.7 billion, but is likely to be revised lower still.

Global shipments for PC makers declined 3.2 percent last year and are predicted to fall more than 10 percent in the current quarter. Dell has not really seen any benefits from the launch of Windows 8 or the Ultrabook.

This puts Dell’s board in a difficult position. So far they have supported Michael Dell but now they have to work out if offers from Blackstone and Icahn will lead to a better bid than the one from Michael Dell and Silver Lake.

They will have to look at the deal in terms of cash. They can’t take the perspective that it’s better for the company to go with Michael, they always have to say “the average shareholder will do better”.

The three rival offers are critically different. Dell and Silver Lake will buy out shareholders for $13.65 a share, valuing Dell at $24.4 billion. If the preliminary offers from Blackstone and Icahn do not firm up, this is the best shareholders can expect. Currently you can pick up a second hand Dell share for $14.50 so a lot of people will be out of pocket.

To make matters worse, few people will invest in Dell shares while there is a big argument about the outfit’s future. Corporate buyers thinking about getting in a few Dell boxes want to know if the company is going to be around in a few years.

Blackstone’s offer of more than $14.25 a share to all investors who want to cash out would mean that Dell is worth $25 billion.

Icahn, on the other hand, is offering to buy 58 percent of shares for $15 apiece.

At the moment, analysts say that Blackstone has the highest chance of success. That could cause Dell some major headaches. For a start it is likely that Michael Dell himself will be removed from the company.

There are rumours that Icahn submitted his proposal only to keep discussions going, because he thought Blackstone may not submit an offer. It is likely that he will walk away from the deal but wants to make the most of his billion dollar investment in the company. He will want a large special dividend before he ties up with a rival bid, probably Blackstone.

Michael Dell’s own involvement with Blackstone would seal it, but it does not seem to be playing out that way. Earlier this week the Blackstone deepthroats were telling the press that he would be fired if they had anything do do with it. Officially, though, Dell has said that he will “explore in good faith” the possibility of working with Blackstone or Icahn.

He claimed he would be like Switzerland in favouring a form of armed neutrality.

But Blackstone wants to asset strip Dell’s financial services unit, worth an estimated $5 billion, and has apparently asked ex HP chief Mark Hurd about running the company. Dell, who is always a little hands on, has good reasons why he would not want this to be the case.

Either way all this is going to get a lot messier and is going to take months to sort out. What the three factions have to realise is that Dell, the company,  could be killed off by their final Battle of Bosworth.