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Microsoft 1978: Would you have invested?
Here in lovely Austin, a growing bloom of progressive blue America encroaching steadily in to the red blight that has infested the Lone Star State for a generation, it's not unknown to meet a real, full-blown dellionaire. That term may not be familiar to everyone so here's a little background: back in the day, IBM had a big plant here. My whole family worked there at one time or another. But a few influential employees got together in the 80s and decided to found a new company focusing on IBM compatible computers, as Big Blue had recently standardized a diverse, chaotic PC market around the Intel 8086 architecture running a neolithic disc operating system from a small start up company called Microsoft. The founders of MSFT are shown above; would you have invested a big chunk of your life savings with those kids? Well, that's another story.

This merry band of former IBM engineers and proven PC pioneers called their new company CompuAdd. It had every advantage. The best and the brightest designers, veteran quality assurance pros, sales execs with a big swinging book of business shipping the growing reseller channel, the latest in manufacturing methods, all sitting atop a cheap, youthful manufacturing and PC literate clerical workforce like a cherry on a money sunday. But they weren't the only ones to see the writing on the wall, not by a long shot. There were several others in Austin alone. One IBM PC clone was even started up around the same time by a college kid who dropped out of UT and made a few PCs a week, essentially handcrafted and built to custom order. Which one of those box makers would you have invested in?

Well, if you chose CompuAdd, you lost every dime a long, long time ago. In fact it would have been hard for a retail investor to invest at all, CompuAdd never even made it to the NASDAQ. But if you bought Dell common stock on the secondary market after the IPO in 1988, at about $10-15 a share, and held on to it through the dot-com boom in the late 90s, with splits and appreciation, you bagged something like a 100 to one return. Which made the college drop out, Michael Dell, the first of many dellionaires.

Today Mr. Dell has another idea, sort of a repeat, but this one isn't drawing anywhere near the applause of that past miracle. In fact it's causing a lot of anxiety, from here in Central Texas to the elite boardrooms of Wall Street and beyond. What is it? Follow me below.

On Friday, Dell common stock was briefly halted then opened at $13.62 for a very good reason: Michael Dell and his zillionaire investment partner Silver Lake want to buy out everyone at 13 dollars and change and take the company private, the opposite of an IPO. Most analysts agree the plan is to hold it private for a few years, perhaps make some product innovations, and then take it public again at a much higher price making themselves more billions. If you happen to hold Dell shares and don't want to sell them at that negotiated price, too bad!

Here's the latest on where things stand as of Friday morning:

Under the terms of the new agreement, Michael S. Dell and his partner, the investment firm Silver Lake, would pay $13.75 a share. They would also pay a special dividend of 13 cents a share, while shareholders would still receive a regularly scheduled third-quarter dividend of 8 cents a share. ...
In return, the special committee would agree to change the rules for victory by no longer counting Dell shares not cast in a special election as “no” votes. The current rules mandate that absentee votes count as “no” votes, creating a high hurdle.
In other words, Mr. Dell and his partner are working toward a dividend that will only matter to giant shareholders—presumably including some who have influence with or perhaps serve on the committee—in hope of changing the rules at the last second to suppress "no" votes. It's all the rage, in politics and in business. If I worked on that committee and helped this deal go through, my next job application might be for unicorn trainer at Michael Dell's home in Austin, affectionately called The Castle.
The Castle
The Castle: Looking out on Lake Austin, the computer czar'€™s granite and stainless steel abode, with its indoor pool and gym, sits behind high walls and touts tight security. Source: Homes of Billionaires/Forbes

Let me put this in class war perspective: There are thousands of people here in Austin and around the world who have put their entire professional lives into Dell Computer. Many have worked there 10 to 20 years, during which time they have built up a massive set of skills and corporate relationships with big-time customers. The vast majority are not dellionaires, not even close, most of those folks are long gone into happy, early retirement. The average veteran Dell employee today is middle-aged, making between 35k and 75k a year. But they've earned a few small perks by sheer length of service and loyalty. Vacation time, full vesting in retirement savings accounts, FSA and Flex accounts, employee stock purchase plan, qualification for Family Medical Leave Act, that kind of stuff.

Dell Computer doesn't have a pension, naturally, they have a 401-k, and many of these veteran employees are way over exposed to Dell stock in those retirement and/or ESOP accounts. If forced to sell at ~$13.75 some would do okay, many would barely break even, many would take a huge loss. But that's just a skirmish in this war on workers.

One of the easiest, quickest ways to boost any mature company's earnings, called Morganization in honor of the robber baron JP Morgan who helped invent it, is to cut benefits, reduce or eliminate raise schedules and bonuses, load more work on to whoever is left, and most important of all, shit can as many older folks as possible and back-fill those positions with younger workers who have never known a booming economy or robust job market: healthier workers who will work for a fraction of the cost and shittier benefits. The fear among many Dell employees I know is that that's what could happen, some of the most important jobs might even be outsourced to third-party account managers. In this grim scenario, these long-time employees will lose not only a job they are great at, some will take a huge hit on their 401-k or ESOP while they lose their entire livelihood, and perhaps worst of all, their healthcare at a time in their lives when they and their loved ones may need it most.

No one can say what Michael Dell's plans really are. Who knows? The fate of Dell's current workforce might be sealed regardless of what happens to the stock. Or if the deal does close, maybe he knows good reasons to keep veteran employees, or maybe there will be a voluntary buy-out deal, with extended benefits, severance pay, contract work, or job placement services for some or all of them. The man is not without a conscience, he's done a lot of good charity work here in town.

But if any of that worst case scenario comes to pass it will be exacerbated here in Texas by the policies of Rick Perry and his utlra-conservative cronies. A state heavily run by the Koch-ALEC cabals, a state that is hell bent on being a neolibertarian, temp-worker paradise. A state government which is dragging their collective feet on implementing even the most basic provisions of the Affordable Care Act in every way possible. A state which has proudly been on an unemployment/safety net cutting jihad for years. Sad to say some of the current employees might switch political affiliations, maybe Texas will become a tiny bit bluer when the blows really start landing one after another. But by then it will be way too late for a lot of them.

I suspect some may well drown in a financial-health scare crises I have experienced first-hand and was lucky to survive, one I would not wish on my most dedicated middle-class political rivals. Because statistics are indifferent, some will never recover, they'll tumble helplessly out of the middle class and become permanent members of the growing have-nots. The consequences are staggering and far reaching for these folks -- people will lose their homes, critical medical care, their kids will have to withdraw from college, every member of their family and many of their friends will be forced to shoulder the burden with them.

I wish I could help them. I wish I could offer some sage advice, say that it will be okay. But I can't. If they have never experienced it for years on end, nothing in the past can even remotely prepare a once prosperous, middle-aged person for being suddenly, permanently poor in red America, in any way, let alone while facing a life-threatening medical condition or trying to support a family. Nothing.

All this uncertainty, all this unwelcome stress, all so that Michael Dell, one of the richest men on earth, a man who has more money than he could spend in 100 lavish lifetimes, has a shot at being just a little bit richer. Assuming he doesn't run what's left of the company bearing his name into the ground and walk away from the smoking wreckage just an ordinary billionaire.


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Comment Preferences

  •  Always (120+ / 0-)

    jobs available in customer service!

    •  Well.... (39+ / 0-)

      RE: Customer Service....
      After being forced by age, job scarcity, location and the need to pay bills, I have been doing 'customer service' for a while.
      It does get worse.  Much, much worse.
      And if it isn't the delightful customers who make your BP skyrocket and cause you to gobble Tums, then it's management who undermine you at....Every. Single. Instance.
      There really should be an amnesty day when you get to tell every a**hole who ruins your day to f*ck off and then tell them to go to the back of the line.  No, you do NOT get to treat Customer Service people like sh*t on your sneaker.  If they cause a scene, call security and get them the hell outta the place.  I just shake my head at the major ignorance/nastiness/stupidity/meanness of the general population.  And this in response to trying to help them!
      BTW, did I say I really, really HATE my job?  Well, I do, and the sad part is that it doesn't even pay the bills.
      It. Does. Get. Worse.

      I think, therefore I am........................... Plus ca change, plus c'est la meme chose....AKA Engine Nighthawk - don't even ask!

      by Lilyvt on Sun Aug 04, 2013 at 08:53:39 AM PDT

      [ Parent ]

      •  try negotiating with a law group... (10+ / 0-)

        ...that is really nothing more than a glorified highway robber . Short story, we got behind on our property taxes to the tune of $XX,XXX and it wasn't because we're stupid, just broke. The Mayor of Philadelphia decided to go into the tax collecting business. Politics had nothing to do with it. Right. So we go down to the law group and proceed to get down on our hands and knees and grovel on the ground for their beneficent mercy. The alternative: Sheriff sale pending. And the only things you can do is get angry, suicide, cry a lot, beg for a payment plan, or live on the street. We opted to beg somebody with a heart of stone for mercy.

        "I wish to have no connection with any ship that does not sail fast, for I intend to go in harm's way." John Paul Jones

        by ImpeachKingBushII on Sun Aug 04, 2013 at 09:30:36 AM PDT

        [ Parent ]

      •  I didn't work directly with customers (3+ / 0-)
        Recommended by:
        Yo Bubba, PhilW, roadbear

        but with sales reps, so I know the feeling of being treated like crap at times. (They screw up the order then expect me to magically fix it, usually after it's already shipped.)

        Having done that, and Help Desk work as well, I'm always extremely polite to whatever customer service person I'm dealing with on the phone...and have received the same treatment back. You really do catch more flies with honey than with vinegar. (Spent much of yesterday with Comcast regarding Internet; turned out it wasn't their error but rather a squirrel got into the main cable box for our complex and nibbled through one of the key lines.)

        There's only one rule that I know of, babies -- goddammit, you've got to be kind. -- Kurt Vonnegut

        by Cali Scribe on Sun Aug 04, 2013 at 10:22:04 AM PDT

        [ Parent ]

        •  Absolutely.... (5+ / 0-)
          Having done that, and Help Desk work as well, I'm always extremely polite to whatever customer service person I'm dealing with on the phone...and have received the same treatment back.
          In the extremely rare encounter with a sincerely (opposed to the insincere overly condescendingly polite person (ie. not polite at all) who use your name with every sentence) person, I will move heaven and earth to get them what they want, spending as much time as it takes to get a satisfactory resolution, much more time than is allocated for a transaction.  Because, despite the name 'Customer Service', it isn't either, it's just a transaction and one best handled for the sole interest of the business, period, if it's beneficial to the customer, great happenstance.

          I think, therefore I am........................... Plus ca change, plus c'est la meme chose....AKA Engine Nighthawk - don't even ask!

          by Lilyvt on Sun Aug 04, 2013 at 10:42:56 AM PDT

          [ Parent ]

      •  No matter how angry I get with different companies (13+ / 0-)

        I really try to be nice to the customer service reps.  They're not the ones who make the idiotic policies.  They're not the ones who write fine-print disclaimers.  They're not the ones setting usurious interest rates, or never ending special fee schedules.  They're not the ones denying you coverage.  They're not the ones who have cut the schedule to the bone so that your delivery or installation can't possibly happen on time.  They're not the one who offshored production of the product to the cheapest possible source, thus ensuring that it would break almost immediately.

        Nope, they're just the ones who get to hear about it after all those things have happened.  I want them to know that some of us know there are humans on the other end of the phone.  

        DOMA delenda est. DOMA: September 21, 1996 - June 26, 2013

        by lineatus on Sun Aug 04, 2013 at 10:33:10 AM PDT

        [ Parent ]

      •  wow (0+ / 0-)

        If i ever see a guy with newly dyed red hair carrying a bag of guns into work I will think of you!

      •  Ultimately (3+ / 0-)

        every company is about customer service, at least in the sense that without servicing customers, there is no company for long. My thought would be, it's OK if I have to take a lot of shit dealing with the customers who underwrite my paycheck and benefits, provided I get some of the perks. Like real bonuses, paid at least quarterly, better yet monthly, bonuses with reachable breakpoints and high end goals, each and every breakpoint 100% indexed to defined performance goals based directly or via correlation on profitability. And these jobs should pay a minimal base living wage.

        That seems fair to me, I do good, I see more money. I go the extra mile, I see a little more.

        •  In a perfect world.... (0+ / 0-)
          That seems fair to me, I do good, I see more money. I go the extra mile, I see a little more.
          Well that makes sense.  I do good, I get rewarded.  And the perks would be nice, and perhaps would make up for the daily insultorium.
          But, this isn't a perfect world, and doing very well still doesn't measure up to some matrix conjured up by people who have never done what you do.  And those perks are non-existent, at least in the Customer Service jobs I've had.  You want perks?  Get another job.  You get paid, that should be perk enough.
          Bonuses?  Ha.  Performance goals met which directly impact profitability get nothin'.  
          And the pay?  Pathetic, not livable, as are the raises.  
          But the CEO gets a mega bonus every year.  On top of a huge 'salary'.
          Every company should be about customer service, good conscientious customer service backed by pride in the company and its' products, but it isn't, it's all lip service.  And the 'customer service' spiel MUST be delivered in a metered amount of time or the customer service agent gets dinged with demerits.

          I think, therefore I am........................... Plus ca change, plus c'est la meme chose....AKA Engine Nighthawk - don't even ask!

          by Lilyvt on Sun Aug 04, 2013 at 05:17:46 PM PDT

          [ Parent ]

  •  Some companies want to go private (20+ / 0-)

    because spending on R&D ruins their quarterly earnings and causes the company to fail.  Dell looks like it might fall into that category.  They need a jump start they can't afford if Wall Street frowns.

    Curious to see if this is greed or smart business.  Dell computers have developed a poor rep over the last few years.  They NEED to update or all those workers will be unemployed anyway.

    I'm not looking for a love that will lift me up and carry me away. A love that will stroll alongside and make a few amusing comments will suffice.

    by I love OCD on Sun Aug 04, 2013 at 08:14:44 AM PDT

    •  Not to mention that the PC business (10+ / 0-)

      appears to have entered a significant secular decline.  

    •  Dell never had a lot of spending on R&D (17+ / 0-)

      The "R" part for PCs is mostly done, it is a mature technology.

      For a while Dell was making a lot of money because PCs were an expanding market, they were very efficient and cost-effective manufacturers, and they were gaining market share.

      But many years ago, like in other industries, most manufacturing went overseas and now foreign firms like Acer can make PCs just as cheaply as Dell and with at least as good quality.

      Furthermore the whole PC market is stagnating. Most people, and corporations, who need and want a PC have one and upgrading is not urgent. And also people are moving a lot of their daily computing tasks to smartphones and tablets, businesses Dell isn't in (well, they do have tablets but not much market share there).

      So there is no easy fix for this. Dell is not going to go back to being a booming, growing company. They are looking to sell it and it will sell for less than it would have been worth years ago, whether or not Dell himself is the buyer.

      •  Buying Up Dying Markets (0+ / 0-)

        Quest and their shriveling cash cow Toad, to try to attempt to milk more gold out of it.  A decades old product, long ago replaced by much cheaper alternatives, yes, maybe less functional, but at a grand per seat vs a couple hundred, or even free, can't beat the price.  The guys at Quest must be shaking their heads...

      •  IBM & Lenovo (0+ / 0-)

        Since Lenovo was building IBM's PCs, IBM was just acting as a middleman taking their very small cut.  Both companies were much better off with IBM selling the business to Lenovo.  IBM got more cash to buy back stock, and without IBM needing it's cut, Lenovo got more room to compete on price and better margins.

        Dell is still just a middleman.

        •  Dell actually did their own PC assembly (1+ / 0-)
          Recommended by:

          in the U.S. until fairly recently, when they closed their U.S. plants. Most notebooks were manufactured overseas, though.

          IBM outsourced more and earlier.

          IBM's sale of their PC business to Lenova was a smart move for them, and was also a sign that the PC business generally was not very attractive anymore.

          •  The whole point of this buyout for Dell (2+ / 0-)
            Recommended by:
            Slightly Wobbly, I love OCD

            is to attempt to become a mid-market IBM.  See e.g. Dell hired John Swainson (ex-IBMer who turned around Computer Associates) to run the Dell Software Group.  Dell can't say it publicly in certain terms without risking current revenues (see e.g. HP under Leo), but they long-term goal is to either exit end user entirely, or, at a minimum, for PCs to be a much smaller component of the company's business, with enterprise hardware, and especially software and services being a much bigger chunk.  And if we're really talking here, this shouldn't be news.  It's been Dell's publicly stated strategy and has informed all of the acquisitions that the company made in the last five years, and everyone else in the hardware business is trying to do the same thing.  HP, Cisco, etc. all want to shift away from hardware to other segments of the IT market.  

      •  Dell workplace (0+ / 0-)

        I have lived here and witnessed Dell's rise from literally a packing warehouse in east Austin to an international power player. They are truly an American success story.

        IMHO their decision to move support overseas was a huge nail in their coffin. PC's were just gaining momentum and Dell cheaped out and sent customer service abroad. We know many dellionaires who uniformly agree. I think this is a chance for M Dell to have a mulligan and get it right.

        We're giving it a second(third) look.

    •  These transactions are expensive (0+ / 0-)

      A few entities will make a lot of money off of the conversion from public to private company. The entities that make money are the ones that have some influence over the process. If the survivors are lucky, only 10% of the value of the company will get siphoned off as it goes private, but probably quite a bit more will disappear.

      There are fewer reporting requirements after a company goes private. These don't all kick in at the same time. Silver Lake will keep the company private until all of the public reporting rules have timed out.

      Silver Lake will make the transaction profitable for themselves one way or another. This may involve ending up with a new version of Dell which is profitable, but that is just one possibility.

  •  my niece worked for dell in austin. she had to (18+ / 0-)

    quit b/c she couldn't take the sexual abuse.

    as for michael dell, some people actually enjoy being assholes.

  •  I've one suggestion (0+ / 0-)


  •  Dell consumer grade computers are junk (18+ / 0-)

    Their business class computers and servers are high quality. What does that tell you?

    It tells me that the company doesn't give a rat's ass about consumers and looks at consumers as nothing more than cash cows.

    Knowledge is Power. Ignorance is not bliss, it is suffering. If you like hypocrite Obama, you'll love hypocrite Hillary.

    by harris stein on Sun Aug 04, 2013 at 08:21:11 AM PDT

    •  Hmm,Maybe That's Why My 8 yr old Dell Desktop (2+ / 0-)
      Recommended by:
      Lujane, cherrymapin

      is still humming along. I've changed hard drives a couple times out of caution, but I bought it refurbished almost 5 years ago and it runs most of the day every day.

      We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy.... --ML King "Beyond Vietnam"

      by Gooserock on Sun Aug 04, 2013 at 08:50:32 AM PDT

      [ Parent ]

    •  Personal vs. Business Class machines (2+ / 0-)
      Recommended by:
      Aquarius40, llywrch

      As an IT person, we've bought many Dell servers over the past decade and those machines still run great today. Now for the personal computer market, I wouldn't buy their crap down there.

      The home-use market is really a "hit or miss" arena for computer quality. Many manufacturers build to whatever is the latest fancy gadget or feature for personal use. But those computers utterly fail within a year or two. As they say, you get what you pay for. If it's on sale or priced less than everything else then there is a reason for that! Don't buy it!

      "I think it's the duty of the comedian to find out where the line is drawn and cross it deliberately." -- George Carlin, Satirical Comic,(1937-2008)

      by Wynter on Sun Aug 04, 2013 at 09:08:41 AM PDT

      [ Parent ]

    •  it tells me to only buy Dell biz hardware (0+ / 0-)

      Dell has had to compete in a low end consumer PC market with margins that only allow profits by cutting corners and using cheap labor. Even if they wanted to, they couldn't just sell high end hardware, like Apple, so instead they have chosen to offer a range of models from cheap consumer junk to higher quality hardware for biz / gov clients (don't forget the gov market - it's huge for Dell), and all of it is customizable.

      So with Dell, you can at least choose your level of quality, and if you know what you're doing you can buy some of the most reliable PC hardware available, which is what I did for years when purchasing for research labs and personally.

      And, if you value saving money over quality, you can also buy a really cheap PC from Dell, which comes with crappy service and support (a significant cost to Dell, which they skimp on to save money), and then complain about how awful Dell is when it comes loaded with bloatware and breaks all the time and you get useless foreign tech support.

      History repeats itself, first as tragedy, second as farce - Karl Marx

      by quill on Sun Aug 04, 2013 at 09:46:38 AM PDT

      [ Parent ]

    •  That's how the PC market works (2+ / 0-)
      Recommended by:
      llywrch, ebohlman

      Consumer-grade machines are very price-sensitive.  Margins are small. Desktop machines are thus built out of the same commodity parts, which is why I build my own out of selected parts.  Laptops are built by a handful of Chinese companies, the same makers for everyone, and they build to the price point.

      Businesses are willing to pay more, since they have to support them, and so business-class machines aren't as cheaply made. I don't blame the vendors for this market segmentation; it's what people seem to want.  Dell just might be a little more obvious about it than others.  

    •  I have to agree (0+ / 0-)

      At work, until we were bought out by an HP-buying company, we exclusively bought dell servers for both internal use and for products we sold to our customers. At the desktop, we used business class towers and laptops. Of course, there we occasional clunkers but usually they made themselves known right out of the box.  If you made it past that, they were, and still are, dead-nuts reliable.

      As a result, I've bought machines for home use that Dell sold as small-business class. I bought machines in 2006 and I'm still using them today without issue. My laptop is ready for replacement because the hinge on the display broke but that was my fault.

      That said, however, I probably won't buy another Dell, or even a Windows PC again. I also have a Macbook Pro laptop which, except for software development work, is now my main machine. With virtual software, I can run Windows as well but I don't want Windows 8 and I can't find Windows 7 any more so I hold off until MS replaces 8, assuming that isn't a POS like 8.

      I don't get mad. I get stabby! - Fat Tony D'Amico

      by sizzzzlerz on Sun Aug 04, 2013 at 11:01:47 AM PDT

      [ Parent ]

  •  Ebenezer Scrooge pleasures himself all over. (1+ / 0-)
    Recommended by:

    Courage is contagious. - Daniel Ellsberg

    by semiot on Sun Aug 04, 2013 at 08:21:47 AM PDT

  •  Thank you for this. (5+ / 0-)

    I knew things had gotten worse in Texas, but this particular situation really is shocking in its vulgarity, raising the bar in the definition of greed.

  •  got a dell on my desk... (4+ / 0-)

    at my CPS school. it's a piece of shit.
    of course, it was a piece of shit when the CPS bought it 11-12 years ago, still runs Windows XP, and has never been serviced/updated.
    (as a mac loyalist, however, i may be prejudiced.)

    United we bargain. Divided we beg.

    by mellowjohn on Sun Aug 04, 2013 at 08:25:36 AM PDT

  •  I don't get it (1+ / 0-)
    Recommended by:

    The stock is worth $13.62 on the open market and they are getting paid $13.75. So they divest and then invest the money previously held in Dell stock in some other investment (hopefully a more diversified one).

    I don't really buy how this is a bad thing for the workers. They had a bunch of stock worth $13.62, and they are being paid $13.75 in exchange for it. What's the problem...?

    (-5.50,-6.67): Left Libertarian
    Leadership doesn't mean taking a straw poll and then just throwing up your hands. -Jyrinx

    by Sparhawk on Sun Aug 04, 2013 at 08:26:06 AM PDT

    •  That part isn't but the diary mixes apples and (5+ / 0-)


      There are several issues:

      1.  Dell appears to be engaging in bad corporate governance practices to get the deal approved, by raising the price to 13.96 effectively in exchange for changing the voting methods.

      2.  There is a possibility that Dell may do bad things to older workers as a result of the deal; though as the diarist notes this may happen anyway.

      3.  If Dell workers are harmed, Texas public policy will make their situation worse.

      •  So... (2+ / 0-)
        Recommended by:
        i dunno, serendipityisabitch other words, the basic issue here is hypothetically what Dell might do in the future (but might do anyway and indeed today already has the power to do anyway).

        This story sounds like a story in search of a lede.

        (-5.50,-6.67): Left Libertarian
        Leadership doesn't mean taking a straw poll and then just throwing up your hands. -Jyrinx

        by Sparhawk on Sun Aug 04, 2013 at 08:54:23 AM PDT

        [ Parent ]

        •  Look around... (3+ / 0-)

          at all the companies that are making broad changes to their  employee benefits, hours, and cutting back on Full Time positions. This is all the Repub reaction to the roll out of Obamacare. None of it is good for the workers in the middle class. Dell is likely taking the company private to make changes he couldn't make publicly and get away with it. Otherwise, why take it private?

          The business world is reacting badly to the changes that need to be made. Instead of embracing the changes they are trying to lie, cheat and screw their employees more to make up for the changes.

          "I think it's the duty of the comedian to find out where the line is drawn and cross it deliberately." -- George Carlin, Satirical Comic,(1937-2008)

          by Wynter on Sun Aug 04, 2013 at 09:13:10 AM PDT

          [ Parent ]

        •  No, DarkSyde's Diary just points (5+ / 0-)

          out what is going on in the Corporate States of What Used to be America, and uses Dell as the example. What's wrong with it? Well, nothing if you're an Ayn Rand Corporatist. But, pretty much everything is wrong with it if you're a Free Market American.
          And the problem with "just move... " is this is happening everywhere.
          Move where?
          "They" (being el Rushbo and Vanity and the others on Hate Radio) beller about "Capitalism!!" and how The Left is out to destroy capitalism. "Let Free Market Capitalism run free and our problems go away," they say.
          Well, not for those workers at Dell. Or for workers most anywhere else.
          And, Vanity et. al. are half right. We're out to kill Ayn Rand Capitalism.
          The brand now practiced by fine Corporatists everywhere. As David or Dante (can't remember which one) has said, "the problem with (Ayn Rand) Capitalism
          is The Rich soon run out of poor people's money." (or something close to that).
          That, indeed, is the problem.

          •  Note Sparhawk's "Left Libertarian" position. (3+ / 0-)
            Recommended by:
            winkk, Dave925, mkor7

            And he's more libertarian than left.

            It's his most noticeable trait in his posts here on the DKos.  Him posting a "what's the matter with Michael Dell doing whatever his money allows him to do" in this diary was about as predictable as the sun rising each day.  :)

            "It puts the lotion on its skin, or it gets the GOP again." - The Democratic Party (quip courtesy of Nada Lemming and lotlizard)

            by Rick Aucoin on Sun Aug 04, 2013 at 01:18:32 PM PDT

            [ Parent ]

            •  It's not about Dell doing what he wants (1+ / 0-)
              Recommended by:
              kathy from austin

              It's more like, I can't even see why workers would be upset at this turn of events (in terms of their stock portfolio).

              In exchange for a bunch of Dell shares, the workers get an amount in cash worth slightly more than the shares' market value. The workers are probably massively over-exposed to Dell in their portfolios anyway. They get to now re-invest that money in a more diversified manner, and they've made a slight financial gain.

              What is the problem here...?

              (-5.50,-6.67): Left Libertarian
              Leadership doesn't mean taking a straw poll and then just throwing up your hands. -Jyrinx

              by Sparhawk on Sun Aug 04, 2013 at 04:46:37 PM PDT

              [ Parent ]

              •  They may make a few $$ per share. (0+ / 0-)

                Their job?? Well, that could be in the can. Ayn never saw a job she didn't want to cut.

                •  As a public company... (1+ / 0-)
                  Recommended by:
                  kathy from austin

                  ...if Dell thought it could make money from cutting their jobs it would be obligated to do so by its shareholders (including pension funds etc).

                  As a private company it will be under no such constraint or requirement.

                  (-5.50,-6.67): Left Libertarian
                  Leadership doesn't mean taking a straw poll and then just throwing up your hands. -Jyrinx

                  by Sparhawk on Sun Aug 04, 2013 at 09:23:46 PM PDT

                  [ Parent ]

                  •  This, Sparhawk. (0+ / 0-)

                    And word is they are going back to their roots. And while I'm not an accountant, I can do the math on the proposed payout vs current trade rate.

                  •  Dell isn't really being run for its shareholders (1+ / 0-)
                    Recommended by:
                    Rick Aucoin

                    at this point.  

                    Ever since the buyout offer was announced there has been some seriously shady shit going on.  It's really questionable whether the board is working in the interests of the shareholders or the interests of Michael Dell.  Based on their actions, I'd lean heavily toward the latter.  

                    They have been trying to scare shareholders into selling by saying how dire the company's situation is.  Which is ironic, considering how most public companies go out of their way to put a positive spin on their operations.  The Dell board has basically been talking down the whole operation.  

                    Also the business strategy the company has been engaged in does not really look like it is meant to optimize the company's performance.  More like it's been run badly to make it look like it's worth less.  

        •  Wasn't (0+ / 0-)

          trying to mix anything, sorry if I did. I was hoping to convey the very points you stated and link them.

    •  most buyouts offer the shareholders a big (3+ / 0-)
      Recommended by:
      Williston Barrett, roadbear, Dave925

      premium, 30-50%.  If Dell tried to buy up those shares on the open market it would boost the price considerably.

      •  In fairness... (1+ / 0-)
        Recommended by:
        wilderness voice

        When the buyout was announced it was at a large premium to the share price at the time.  I think it was at $10 and change.  What's happened is because the buyout is known the price is more or less tethered to the buyout price, since if the buyout goes forward you'll get that much for the shares.  

        The issue is that most of the long term investors in the company feel that it is worth significantly more than  $13.75, actually over $20.  So, they don't really want to sell even for that "premium".  They'd rather just hold and wait for things to turn around.  

    •  The stock is basically chained to the deal (0+ / 0-)

      Who would be stupid enough to buy the stock for more than $13.75 when there's a large chance the company is going to be sold for $13.75.  Especially because the committee seems hell bent on ramming this deal through and changing whatever rules are necessary for it to happen.  

  •  OT: Does anyone know the names of the people (0+ / 0-) the 1978 Microsoft photo?

    "Ridicule is the only weapon which can be used against unintelligible propositions." - Thomas Jefferson

    by rfall on Sun Aug 04, 2013 at 08:27:07 AM PDT

  •  This comment is for DarkSyde (17+ / 0-)

    DarkSyde, I always read your diaries even if it's on a subject I have absolutely no interest in. I find that you peak my interest in your writings and observations. Every time I finish one of your diaries I find that I come away with a lot more knowledge than I started with and I start searching for more information on the subject. Then I get lost in the endless loop of internet searches and BOOM! another day shot to hell. Damn you!!!

    I don't post often and mostly lurk but I always make sure I read your stuff. Thank you.

    I'm a gardener. When I get excited I wet my plants.

    by ellefarr on Sun Aug 04, 2013 at 08:27:58 AM PDT

  •  This looks like a typical Private Equity deal, (6+ / 0-)

         is Silver Lake a PE firm ?

    The free market is not the solution, the free market is the problem.

    by Azazello on Sun Aug 04, 2013 at 08:29:16 AM PDT

  •  Dell has been handing off... (9+ / 0-)

    ...manufacturing piece by piece looking to boost their return on assets (decrease assets, increase return).

    They're a brand and marketing company.

    How much money can someone want? How much can someone need?

    "FK the deficit. People got no jobs. People got no money." Charlie Pierce

    by RubDMC on Sun Aug 04, 2013 at 08:30:40 AM PDT

    •  Thousands are for Personal/Family, Millions are (3+ / 0-)
      Recommended by:
      Lujane, RubDMC, Dave925

      for luxury and small businesses, billions are for enterprises and buying government.

      If he wants more billions he probably wants a say in lots more than Dell.

      We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy.... --ML King "Beyond Vietnam"

      by Gooserock on Sun Aug 04, 2013 at 08:53:03 AM PDT

      [ Parent ]

  •  There is a reason they can take this private and (6+ / 0-)

    that's because the product quality and management has gone down hill. All those actions you mentioned could easily be done under the current corporate structure.  I'd say the pressure to reduce costs and maximize stock price is even greater when you have every shareholder screaming for a higher stock price.  

    A lot of people have rode the coat tails of Dell and done very well.  Including the workers. The person that built this company into what it was wants to run the show again.  Think of Apple and how Jobs was brought in and turned it around.

    Never argue with an idiot. They will drag you down to their level and beat you with experience.

    by thestructureguy on Sun Aug 04, 2013 at 08:34:48 AM PDT

    •  I also think this is what is going on (2+ / 0-)
      Recommended by:
      RationalThoughtProcess, Bluehawk

      Dell seems to be trying to take his company back from the corporate types who he thinks are running the company into the ground (I would agree with him). I hope he succeeds, and then puts the required effort and expense into restructuring the company for survival.

      History repeats itself, first as tragedy, second as farce - Karl Marx

      by quill on Sun Aug 04, 2013 at 10:03:18 AM PDT

      [ Parent ]

  •  You reminded me of a joke (3+ / 0-)
    Recommended by:
    jabney, Samer, TrueBlueDem

    Q: What kind of computer sings?

    A: A Dell.

    "Doing My Part to Piss Off the Religious Right" - A sign held by a 10-year old boy on 9-24-05

    by Timbuk3 on Sun Aug 04, 2013 at 08:44:41 AM PDT

  •  LOL. What a great photo. A true story.... (11+ / 0-)

    I work with a 50's age computer scientist.  He actually was a Professor at my University for a time and then stepped down to do research only.  He said he hated teaching.  

    As I was supervising him, I wanted to get to know him.  I said to him "Howard, how did you come to be here?"  He said "After I graduated from school, I interviewed for a few jobs but none of them interested me."  

    He continued "In 1980, two guys came to UMBC to interview Computer Science graduates.  I didn't like them because all they seemed to be interested in was making money.  They weren't really interested in developing new languages".

    He smiled and said "The two guys were Bill Gates and Steve Ballmer.  If I had taken that job, I would have been the one of the first fifty employees of Microsoft".

    I said "WTF?  You could have been rich!"

    He said "That's what my ex-wife kept telling me".

    We will never be free from fear as long as we fear the NRA.

    by captainlaser on Sun Aug 04, 2013 at 08:57:17 AM PDT

  •  Michael Dell a name that shall live... (3+ / 0-)
    Recommended by:
    concernedamerican, DarkSyde, Dave925 infamy. But for all the pure evil in his heart, our revilement my be misdirected. One man didn't create this and one man can't solve it. The problem is as inherent in venture capitalism as it is systemic. Follow the money. Who benefited most from the stimulus program? Did it funnel money into the right hands? I don't think so. I was for "stimulating" from the bottom up so the money would go into the hands of the working class, not the top down where it ended up in the hands of the uber-wealthy. The banks have all the money anyway, so unless people stopped depositing they wouldn't have suffered. So who was the winner? The Banksters, Wall Street, and mega-corporations. And who are the losers? Us.

    On taxpayer bailouts for the Banksters and Wall Street, I vehemently opposed rewarding the very ones who caused the financial crash. Their credit score is unscathed, while millions of American taxpayers-and their heirs-are stuck holding the bag. The working classes' credit score is so damaged they couldn't buy a stick of chewing gum on credit. And the banks get to lend us back our own money-with usurious interest rates that would make Scrooge's face blush red.

    And what does the federal government do when they need more money? They issue themselves another credit card. Did they hold anyone accountable? No. But don't you dare miss paying your income taxes or the taxman will come a knocking quick. And we won't even talk about what happens when you don't have the money to pay your property taxes. They don't want to hear about how you nearly worked yourself to death to pay your 30 year mortgage off. And even then, the debt is never really discharged, meaning you never really owned it in the first place.

    "I wish to have no connection with any ship that does not sail fast, for I intend to go in harm's way." John Paul Jones

    by ImpeachKingBushII on Sun Aug 04, 2013 at 09:01:28 AM PDT

    •  I (1+ / 0-)
      Recommended by:

      don't think I'd put Dell in the same bag with Wall Street CEOs. He made his money straight up and never asked for a handout, much less after causing the economy to crater.

      •  "judged by the company you keep"... (0+ / 0-)

        ...Looking at the bigger picture, I'd love to be a fly on the wall in those boardroom strategy sessions of the majority of American multinational corporations that made it filthy rich--while working class people like my next door neighbors who lost their $800K life savings in the crash without so much as the first charge being filed against any of those thieves, much less an apology--using the "new and improved" corporate model consisting of off-shoring, globalization, free trade (which is anything but free), hiring the best tax evasion lawyers and CPA's in the business to manage their offshore Cayman Island accounts. And using the "members only" Wall Street insider information they got from their golfing and country club buddies on the links. And I better not forget wearing an asbestos flightsuit, of course. Otherwise, my wings would probably spontaneously combust.

        "I wish to have no connection with any ship that does not sail fast, for I intend to go in harm's way." John Paul Jones

        by ImpeachKingBushII on Sun Aug 04, 2013 at 04:43:46 PM PDT

        [ Parent ]

  •  Texas, progressive, technology (6+ / 0-)

    Most people are not aware of this but pretty much Texas is responsible for affordable consumer grade electronics.  Texas Instruments, located outside of Dallas, is typically credited with the commercialization of the transistor(invented by Bel Labs), which forms the basis of all electronics, and the integrated circuit(IC).  What is interesting is that there was no consumer demand for the IC so they created the demand by inventing the and marketing the electronic calculator.  At the time one could buy and HP or TI, and the TI was cheaper and easier to spell naughty words and make go crazy, presumably due to 'don't care' states.

    Later Compaq, located outside of Houston, did a clean room reverse engineering of the IBM BIOS, and fought a court battle to bring the IBM compatible personal microcomputer to the masses.  It was very slightly more affordable than a real IBM microcomputer.  A couple years later Dell took the very low skill(everyone was doing this in their garages at the time and selling to small business) or taking off the shelf commodity parts and assembling them into a computer.  The problem is, as anyone who has owned a Dell or similiar machine, is that the integration work done is not up to the quality of the like of HP.  Dell got around this by giving a very generous warranty.

    Of course Austin has done some stuff, and has become a hub on electronics manufacturing.  In Texas, though, no one takes them very seriously, other than the folks who are looking back to a 'happier time' or those that move here from less diverse places. I mean one expects a city to have more than one Apple Store, at least in Texas.

    What makes Austin different from most of Urban Texas is not that it is a growing blue area, most urban areas have some progressive representation and went for Obama, but in it's representation of a Texas that once was.  It has nearly a majority of white non-hispanic population, 48% while much of the rest of urban Texas is half that.  It has a straight white non-Hispanic male mayor, and can't think of any other large city in Texas that has one of those.  

    So when you come to Texas and want a diverse modern Texas experience, and some high tech discussion, go anywhere else.

  •  Years ago Dell took down the little (2+ / 0-)
    Recommended by:
    Bush Bites, ladybug53

    computer company my son worked at.  I would never buy a Dell product.

  •  well? (1+ / 0-)
    Recommended by:

    i want to invest in water and oxygen. that is all.
    and thanks for the pic of little geek royalty.
    i'm sure a big surprise is just around the corner.
    freedom's just another word for ...

    @Hugh: There is no Article II power which says the Executive can violate the Constitution. * Addington's perpwalk? TRAILHEAD of accountability for Bush-2 Crimes.

    by greenbird on Sun Aug 04, 2013 at 09:07:37 AM PDT

  •  I still have company stock (0+ / 0-)

    from a tech firm that I used to work for (Compuware) CPWR.

    It's worth maybe 10 cents on the dollar.

    If the pilot's good, see, I mean if he's reeeally sharp, he can barrel that baby in so low... oh you oughta see it sometime. It's a sight. A big plane like a '52... varrrooom! Its jet exhaust... frying chickens in the barnyard!

    by Major Kong on Sun Aug 04, 2013 at 09:17:43 AM PDT

    •  HP stock is moving in that direction (3+ / 0-)
      Recommended by:
      llywrch, Bluehawk, Dave925

      Mom-in-law still has a few hundred shares that her husband bought under employee stock purchase over the years he worked there. Trying to figure out what we're going to do with it; she wants to go ahead and donate it to her church but wants the price to go up a little more.

      Running HP into the ground is just one of the reasons I hate Carly Fiorina, with a flip of the middle finger to the board that can't seem to get their heads out of their collective asses to find competent management. (Yeah, I'm late father-in-law loved HP, and actually knew Bill and Dave personally having covered them as part of his job as publications manager.)

      There's only one rule that I know of, babies -- goddammit, you've got to be kind. -- Kurt Vonnegut

      by Cali Scribe on Sun Aug 04, 2013 at 10:36:20 AM PDT

      [ Parent ]

  •  mike dell thinks he can turn around Dell Corp (4+ / 0-)

    i think he's kidding himself, the primary market
    is dying (Desktops), laptops aren't much better,
    the real move is in tablets and smart phones, which
    google and apple have locked up.

    Dell can fight it out for servers and services, but
    HP didn't make that work,

    where is the market for Dell?  to chase sony and apple
    into consumer electronics?

    •  That's (1+ / 0-)
      Recommended by:

      a good point, I don't think anybody knows if end use devices are converging on a single platform or diverging to many disparate ones. At least I assume Dell thinks he's knows or has plans to play all of them and see what works. EG: I assume he has some plan beyond merely morganization. To really cash in on this deal it's going to take actual successful innovation.

  •  Money knows no morality (4+ / 0-)
    Recommended by:
    fly, wilderness voice, SherwoodB, No Exit

    The people who worship at the altar of Capitalism and pray to Market Forces as the answer to all our earthly problems might as well be worshipping Moloch.

    Money doesn't give a damn about right or wrong, anything except immediate gratification. It doesn't give a damn about anything that doesn't fit on a balance sheet. It cares not a fig for civic responsibility or the greater good. It is a terrible servant and a worse master.

    The business of business is profit. It's not about creating jobs. It's not about making the world a better place. It's not about leaving a legacy for the future. It's about piling up as much money as possible by any means that can be gotten away with successfully. Anyone who tells you differently is either deluding themselves, trying to sell you something, or possibly both.

    Money is like fertilizer - too much of it in one place is a health hazard and a danger to the community. It's only useful when it's spread around where needed. Piling up too much of it in one place is begging for disaster.

    "No special skill, no standard attitude, no technology, and no organization - no matter how valuable - can safely replace thought itself."

    by xaxnar on Sun Aug 04, 2013 at 09:34:51 AM PDT

    •  Whoa! Money is a tool, nothing more (1+ / 0-)
      Recommended by:

      The money is a tool fashioned by people.
      People decide on the moral framework and what is permissible.
      The fact it that we have allowed a false and destructive moral framework of propaganda to take root and flourish.

      Propaganda is programed into people by fashioning a short sound bite like "greed is good" and repeating it over and over again.
      We have never responded in kind.

      99% of BACTERIA in the world live in cooperative biofilms to survive, yet we have let cooperation between workers be demonized. The ability to organize is the ability to survive and yet we have let worker organizations be demonized by organized cabals like ALEC and the Chamber of Commerce which is nothing more than a manufacturer's trade union.

      To Goldman Sachs in according to their desires, From us in accordance with the IRS.

      by Bluehawk on Sun Aug 04, 2013 at 02:17:30 PM PDT

      [ Parent ]

  •  A real Sunday morning eye opener (1+ / 0-)
    Recommended by:

    I had no idea.

    I must be dreaming...

    by murphy on Sun Aug 04, 2013 at 09:53:40 AM PDT

  •  Would Icahn be better? (3+ / 0-)
    Recommended by:
    Justanothernyer, davechen, Dave925

    Michael Dell is in a bidding war against Carl Icahn, notorious corporate raider.  Icahn probably thinks he can milk more short-term profit out of the company. He preaches "shareholder rights", which means that shareholders alone, not employees or customers, are the stakeholders that company managers must answer to.  Anything legal that can benefit shareholders must be done, to hell with workers.  Since Dell founded the joint and knows people there, he strikes me as the less evil choice.

    That's the state of capitalism in America today.  It's all vultures bottom-feeding the remains of former growth companies, whose key assets are largely now in China.

    •  This is the only good comment in this thread... (5+ / 0-)
      Recommended by:
      davechen, No Exit, Bluehawk, K S LaVida, bjhunt

      that points out the biggest and most obvious flaw in this post.  Full disclosure: I say this as a huge Darksyde fan going back pre-Katrina brilliance and as a current Dell employee (one who has never held Dell stock and has absolutely zero access to any material, non-public information about the deal).  I posted below my full thoughts, but the short version is at this point there are two alternatives: Dell or Icahn and it's clear which scenario will be a bloodbath in Round Rock, and it's the one where the crazy greenmailer who knows nothing about the industry is all of a sudden in control of the third-biggest PC manufacturer and biggest server manufacturer in the world.

      •  True Ican is a $hit! (0+ / 0-)

        He would do a Bain style asset stripping thing in a heartbeat.

        To Goldman Sachs in according to their desires, From us in accordance with the IRS.

        by Bluehawk on Sun Aug 04, 2013 at 02:19:50 PM PDT

        [ Parent ]

      •  Thank you for your comment (1+ / 0-)
        Recommended by:

        I'm happy to hear from an employee here.

        I used to work for a huge computer company, one that no longer exists.  Not because of financial mechanations, but because they didn't keep up with the market, and their business just shrank away.  It's a tough business.  Dell was always low on R&D (not much needed if you focus on commodities and let Intel do the heavy lifting) and big on knowing how to deal in the tight-margin commodity space. Nothing wrong with that; it worked for a while, and still works more or less.  And they have expanded from just PCs into higher-end business products, where margins are better.  So an asset stripper like Icahn would be worse, as he'd just fool some marks, er, "investors" with phoney quarterlies, and then get out, probably "exiting" (in the financiers' verb-transitive sense, not like "exiting from") the company itself in the process.

        If Mike gets back control, there's always the chance that he can do what he says he wants to do (this is usually a lie, but hey), set aside the quarterlies for a while and reposition the company for real long-term growth.  I'm not holding my breath, of course, but Mike is more able to do that than Carl.

        •  I doubt Dell is able to do that (0+ / 0-)

          The problem with Dell (the company) is not the "quarterlies", the problem is it's been mismanaged.  

          If Dell succeeds in buying out Dell, then my hope is that it blows up in his face and he doesn't end up with the big payoff he's hoping for.  

      •  Michael Dell is an idiot. (0+ / 0-)

        He's been in charge for most of the last decade and under his guidance, the company has gone down the crapper.  Frankly, kicking him to the curb and bringing in new blood would be beneficial at this point.  I don't know for sure whether Icahn would benefit the company's workers or not, but Michael Dell generally doesn't seem to have a clue.  

        •  It's really not about Michael Dell. (0+ / 0-)

          It's about whether the industry vets running the enterprise hardware, software and services businesses can weather this storm, correctly analyze the market and motivate their people to execute and deliver.  

    •  Unknown (0+ / 0-)

      I didn't want to complicate the article. But that's why their fate could be sealed regardless.

  •  Sooo rec'd..just for that awesome video. (2+ / 0-)
    Recommended by:
    llywrch, Dave925

    I worked for over 20 years in customer service. There is an element in society that just loves to abuse people and customer service reps are ripe for the pickin'. The stories in that video do not surprise me one bit. Some people in life need to get their asses kicked just once so they can learn the manners their mother failed to teach them. My disability took me away from that field. Sometimes the 30% cut in pay with the accompanying money worries along with the constant pain seem a fair price to pay to not have to put up with the general population.

    Oh, and Mr. Dell, eff you, you piece of garbage. I'd rather build my own rig than give you another dime.

  •  the computer industry is a good symbol for the (5+ / 0-)

    entire corporate economy . . .

    Back in the 80's, the computer industry was the example par excellence of the ideology of capitalism----there were hundreds of little startups all over the country, often founded by people in their garage, in which many people got rich overnight. Free-market apologists pointed to the tremendous "success" of capitalist competiton, and breathlessly declared that "anybody" could start their own company and strike it rich.

    By the early 90's, however, the harsh reality of corporate capitalism became clear---nearly all of the startups that flourished in the 80's were gone. They had been bought out, consolidated or flat-out driven under--and the entire industry was now dominated by a tiny handful of huge corporations who dominated the entire market, just as in every other industry.  And by the 2000's, the computer industry also fell into the same conflict that every other corporate industry had---globalization and international trade wars, as even the biggest corporations were bought out, mergerized, or driven under by corporations from other countries.  By 2010, the computer industry was no different than any other industry---a handful of global megacorporations dominated the entire world market, and everyone who had flourished in the era of the startups had, if they were fortunate, floated to earth on their golden parachutes or, if they were unfortunate, were now working at McDonalds.  A tiny number of big winners; a huge number of discarded losers.

    And THAT, my friends, is what corporate capitalism is REALLY all about.

  •  this diary is 98% baseless & unfair conjecture (4+ / 0-)
    Recommended by:
    davechen, DarkSyde, Bluehawk, bjhunt

    Dell as a company is failing. It will continue to shrink away into oblivion unless drastic steps are taken.

    Its founder wants to take it private so he can try to turn it around, taking steps that would not be possible if the company was publicly traded because the stock would be punished mercilessly.

    All of the terrible, horrible things that the diarist frets Michael Dell might do (things the diarist admits to having no evidence whatsoever that Dell actually intends to do) are totally possible to do without taking the company private -- indeed Wall Street would cheer and celebrate if Dell did those terrible, horrible things.

    If Michael Dell's objective was to temporarily pump his stock value so he could add more billions to his paper wealth, and punish everyone who works for his company because he's Satan in disguise and derives sexual pleasure from inflicting economic pain on the middle class, there would be no reason to try to take Dell private.

    I don't think this diarist is very well informed; I know this diary isn't.

    •  Incorrect (2+ / 0-)
      Recommended by:
      Ralphdog, Dave925

      this is the consensus concerns of both dell employees and analysts both around town and elsewhere. There's nothing in this piece that isn't old hat oft discussed and well known to those closely following the issue and who are familiar with the industries, personalities, and histories. I simply restated parts of it it to a wider laypublic.

  •  Insider's view: this is a bad/uninformed diary... (3+ / 0-)
    Recommended by:
    fearghoul, bjhunt, Hatrax

    I am a current Dell employee (I own no Dell stock, never have, and know absolutely nothing other than what I read on the web about the deal, and I am many, many levels down in the org chart from the c-suite, and have never possessed any knowledge throughout this entire process that might constitute material, nonpublic information.  I am pretty well-read on this subject and deeply interested, given its potential to affect my livelihood and ability to provide for my wife and child).  This post has several major flaws.  I can tell you that I am rooting hard for Michael Dell to win a thorough and resounding victory and chase Icahn and his allies off, because I think I have a future at Dell under the Michael-owned private company post-buyout, and I do not have much confidence that I would in any alternative scenario.  I say this also as a huge DarkSyde fan going back to even before the Katrina heroism period, and I should hasten to add the caveat that this diary, while bad, is no worse than the average bit of dreck covering this deal that makes its way onto a financial news site.  If you want to read insightful comments about the Dell buyout and the company generally, I recommend, as is the case with all things these days, that you seek out the best blogs among the subject matter experts. and have put out mostly intelligent coverage of the buyout and the recent history of the company generally.

    Why this diary sucked reason 1--it fails to explain: who are the shareholders opposing the deal?  The leader of the opposition to the buyout is Carl Icahn.  For anyone not familiar with Icahn, here's a link to his wikipedia page, specifically the section about his exploits in the world of thoroughbred horse-racing:  This buyout fight is the tale of an even richer Wall Street financier trying to take advantage of a less rich 90s tech stock billionaire's scheme to arguably take advantage of his company's low public trading price (in Dell's estimation, through the thoroughly tested market doesn't seem to agree).  Mr. Icahn has teamed up with several other "institutional investors" (a euphemism for other Wall Street types, including Pension Funds run by Wall Street Types, Icahn lobbied the institutional shareholders for months while simultaneously buying up a huge position in Dell (reportedly over $1 billion, or more than 5% of his purported total net worth), and he has succeeded in splitting the vote of the institutional investors (  

    The Institutional Shareholder Service (aka ISS, and instead of sticking a wikipedia link into every sentence here, I'll kindly ask any interested reader to google these terms if they want more information) recommended a buy and analogized the financial logic behind Dell's buyout as "trying to catch a falling knife."  So the smallest violin is playing for the “shareholder rights” of a bunch of bankers, ex-bankers now running funds worried about having to book a loss in their Dell position, and their corporate raider ringleader who is trying to insert himself into the corporate governance of a company he almost certainly cares not a wit to actually run.  Anyone arguing that retail investors comprise a sizeable chunk of the opposition are either aligned with Icahn or not paying attention.   To the extent there are genuine value investors left in this stock (i.e. what’s left once all of the funds, Dell, Icahn and employees are excluded) they aren’t paying attention, and probably haven’t since the bought the stock years ago at a multiple of its current price.  That’s why the vote has been hung up.  Michael and Silverlake have the majority of the shares voted, but they are losing because almost 20% of the shareholders haven’t bothered to vote at all.  So if you’re concerned about shareholder rights here, you’re making the argument that the existing precedents that protect minority shareholders in a transaction with a 30% holder should apply to a 14% holder in a going private transaction with an abnormal number of undervotes in order to protect the rights of Wall Street types to mess with the managers of the company (and extract a price that’s some amount higher than the premium that the board negotiated to change the rules).  You might feel strongly about this issue as an academic concept, but it’s hardly a watershed moment in the history of US corporate governance.

    All this begs the question why are these Wall Street muckety mucks so against the deal?  My opinion (worth precisely what you've paid to read it): they are terrified that Dell could succeed, and it would make this kind of a transaction more popular.  The only time the Dell buyout got favorable coverage was when it was announced, and people either praised the creativity or criticized the supposed tax dodge of trying to leverage unrepatriated (and therefore not taxed in the US) overseas capital by putting the company's balance sheet up as collateral for the lending that provides most of the financing.  The praisers hoped this would spur a trend of more activity in the LBO markets to try to capture upside of undervalued firms using the historically low interest rates that the big banks could offer.  

    Quick aside: All of this certainly smells like dirt on Dell’s part to regular readers of this site in the aftermath of Romney 2012.  And I certainly share the general sense of skepticism for the merits of the PE industry and the sad tales of woe told by the executives of US corporations about the effects of US corporate tax rates.  And yes, Michael gave money to Republicans (and Dems, but mostly GOP; we are in Texas after all), and it’s true, his political and ideological outlook probably wouldn’t mesh well with the views of many readers of this site.  His company has been caught doing dumb things in the past, and people have had bad experiences with their Dell PCs and the tech support they encountered when trying to fix it (others didn’t, but they tend to be less enthusiastic commenters in blog posts with the word “Dell” in the title).  But in my mind the Dell buyout is what PE is supposed to do—allow for embattled companies to make substantial changes to execute major shifts apart from the distortive effect of the public markets overemphasis on earnings while preserving what’s working about the core business.   In this way it provides a vehicle to avoid more disruptive changes (i.e. bigger layoffs) and build on what’s working with an aim of turning the company around and creating more growth and better opportunities for employees, better products for customers and potentially a future as a public company that the public markets will appreciate.  That’s essentially what Silverlake did when they took Seagate private for a short period and Seagate re-emerged with better products that they built with their lessons learned from their additional R&D spend.   Obviously the Dell buyout scenario is vastly different and would involve a much bigger transformation, but the basic idea here is to restore the firm to health by building new muscle.  

    But there is stuff at Dell that’s working.  Dell didn’t make servers six years ago; Dell is now vying for position as the #1 server manufacturer in the world.  The Services business has been largely profitable and growing for the better part of two years.  The software group is in its infancy, but has amassed a ton of impressive talent in its upper ranks.  I saw someone upthread (who was apparently more knowledgeable about all these aspects of Dell than most commentators are) dogging on Quest and Toad.   I have a lot of confidence that Swainson is up to the task of growing Quest’s business if he displays 50% of the acumen that he demonstrated in turning around CA.   And leading into my next main point: there’s no indication that Icahn or any of the other suitors were interested in this transformation/rehabilitation project, but there’s good reason to think that the guy with his name on the building would be thinking of something more dignified than a bust out.   In my view that's what this buyout is about: Michael Dell trying to salvage/reinvigorate his life's work and thumb his nose at Wall Street for underestimating him.  And this proxy fight is Wall Street saying “oh no you won’t.”

     Why this diary sucked reason 2—mainly because of reason 1, it fails to consider which option--Icahn or Dell--would lead to better outcomes for existing employees.  A simple check of the public filings would reveal what all of the bankers and consultants who have weighed in on Dell have told Dell, Silverlake and the several other PE firms that considered a bid (and ultimately declined to make one).  All scenarios involved big cuts to the existing cost structure of the company in one way or another.  Michael's public comments have been somewhat opaque, but the view he has generally espoused is that the company can transform itself if there is a gradual hand-off from the PC business to software and services to drive growth and profits in the future.   Most of the banker's scenarios involve bigger cuts and more aggressive move to achieve costs reductions more quickly, and the path Michael has espoused has generally been portrayed as the least aggressive path in all of the materials that have been made public.  

    Icahn claims that he will buy the company, issue a gigantic dividend to the shareholders essentially flushing all of the cash out of the company, and then keep the now debt-swamped company public to be battered in the public markets.  This is a bust out plan, pure and simple, and not a particularly logical or plausibly profitable one.  Icahn's analysis of the various Dell business units and their market value was a farce; he essentially had every segment of the company as a market leader, when even a person like me who believes that the company can accomplish a transformation knows is nonsense.  It's mainly Icahn's lack of seriousness in his analysis of the business that gives me the biggest clue that he's not in this to make money.  He wants to put a torch to Michael Dell's life work to teach Dell and any other founder CEO a lesson about what happens if you try to profit at the institutional investor class.  

    3) About all those employees holding Dell stock... It's flat out wrong to say that Dell employees buy into Dell stock via their 401ks.  That's just completely wrong.  This hasn't been the case at Dell for many years.  It's true that there are long-time employees who may have the stock (or options to purchase the stock) at strike prices that have been underwater for years.  I believe it's possible (and I admittedly don't have perfect understanding of every detail on this) that employees could elect to invest their 401k deduction in company stock, but that was not a requirement of the program, which is generally very generous (5% company match).  But the vast majority of the stock currently held by employees was awarded as incentive compensation (in the form of restricted stock units) to managers and executives, who might have harbored hopes of a big rebound in the stock price, but generally would've treated those awards as bonus compensation, and those kinds of employees certainly had the knowledge and ability to diversify out of Dell stock, as well as the keenest understanding of the company's position in the market.  While it's a bummer for employees holding mostly worthless stock/stock options, there just wasn't a realistic scenario that would've led to a big spike in the stock price such that their stock would've become valuable.  Furthermore, the company adopted a plan after the buyout was inked to compensate long-time employees for their underwater stock and options to at least acknowledge the long-time employees, which was totally discretionary by Michael and Silverlake, and, to me, spoke to the future they envisioned for the company, which included the contributions of those long-timers.

    And honestly, anyone who works at Dell knows that the long-time employees are essential.  When you start working there you are awash in an ocean of acronyms and org charts, and it takes the average new employee at least a few quarters to get their bearings.  Most new employees who make it at Dell have a long-timer who they pepper with questions and from whom they learn to navigate a gigantic and sometimes confusing global megacorp structure.  Relatedly, Dell is well-known in Austin and in the industry for having a fantastic program to train managers, and I've generally found the management culture to be extremely open, honest, humane and fair, especially during this bizarre period of c suite level battle for control of the company.  

    So that’s the long-winded breakdown from the cube’s view in Round Rock.  I think DarkSyde’s take is pretty common among casual observers, and it misses a lot of important detail that really ought to make it into analysis of this company and this deal.  I submit to you all that if you do actually care what happens to Dell employees (and what effect that will have on the Austin area generally), you should be pulling hard for Michael to get over the many hurdles that are still left and pull off this deal.  

  •  Even in that photo from 1978 the ratio of (0+ / 0-)

    net worth is approximately 50,000 to 1

    (the poorest in that photo is said to be a millionaire, though I'm not sure if it's public knowledge; the richest is Bill Gates)

  •  Does everyone know why CompuAdd died? (0+ / 0-)

    It's really quite sad.

    In the run-up to the first Gulf War under pappy Bush in 1990, the U.S. military suddenly realized their computer resources were grossly out of date. They had lots of dinosaur IBM mainframes creaking along on ancient custom Fortran/COBOL code that were increasingly difficult to maintain and impossible to update. It was obvious even to the Pentagon that small/cheap desktop PC's were the wave of the future.

    So the Pentagon put out a 'request for proposal' for thousands of new PC's to supply their rapidly expanding data processing needs. It was put up for bid, with a colossal contract for many millions of dollars. The usual suspects, as in massive companies like IBM and Compaq, submitted bids. But the leaner, younger, hungrier CompuAdd submitted the winning bid, and soon had a signed contract for many millions. This not surprisingly did not sit well with the industry titans like Compaq & IBM, and they immediately started scheming to sabotage the contract. Corporate lawyers by the hundreds flocked to Washington, filed numerous lawsuits, and eventually got CompuAdd's contract suspended. It goes without saying that there was little or no merit to the lawsuits; that was really beside the point.

    Naturally, CompuAdd had to spend a lot of money up front to expand their production facilities so they could fulfill this contract. They were compelled to extend themselves financially in preparation for making a lot more money later. And it was "Charlie Brown and the football"; when the contract was abruptly suspended, CompuAdd was at a full run, kicking with all their might....


    The over-extended company, helped by a few well-placed tripwires & elbows thrown by other corporate goliaths, soon collapsed.

  •  Perhaps Mr. Dell will get to host (0+ / 0-)

    a picnic and general be-in for the former employees at his lovely estate after the company gets leaner and meaner and sheds those unnecessary workers.

  •  Uhh (1+ / 0-)
    Recommended by:

    Seriously dude, you work for Dell and yet you're against privatization? Michael Dell is trying to save the company and our jobs. if Icahn wins, he's going to do what he does with every other company he wins: run away with the profits and shut the company down.

    How does Dell investing in his own company spell him trying to maximize his profits? That's completely different from Icahn, who destroys everything he touches for personal gain. Remember TWA?

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