Dell to stick to current strategy as private company

SAN FRANCISCO Tue Feb 5, 2013 10:20pm IST

A company logo of Dell is seen on the cover of its laptop at a Dell outlet in Hong Kong October October 21, 2009. REUTERS/Bobby Yip/Files

A company logo of Dell is seen on the cover of its laptop at a Dell outlet in Hong Kong October October 21, 2009.

Credit: Reuters/Bobby Yip/Files

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SAN FRANCISCO (Reuters) - Dell Inc, which intends to go private in a $24.4 billion deal led by founder and Chief Executive Michael Dell, plans to stick to its current turnaround strategy to diversify away from personal computers.

Dell Chief Financial Officer Brian Gladden told Reuters in an interview on Tuesday that the company can now pursue its strategy without being limited by the pressures of public ownership.

"Under a new private company structure, we will have time and flexibility to really pursue and realize the end-to-end solutions strategy," Gladden said. "We will be able to pursue organic and inorganic investment and we won't have the scrutiny and limitations associated with operating as a public company."

"So we are generally very, very encouraged by the future here," he added.

The company, once the world's top PC maker and a pioneer in computer supply chain management, is struggling to defend its market share against Asian rivals including Lenovo Group Ltd. It is trying to bolster growth by focusing on products and services to corporations.

Dell has also over the past couple of years given up low-margin sales to consumers and is moving into higher-margin areas, such as businesses in the public sector and the healthcare industry.

But the turnaround has been slow and painful. In November, Dell saw its fiscal third-quarter profit slide 47 percent, hurt by lower PC sales, weaker demand from large corporations and the shift to mobile computing.

Gladden acknowledged that the turnaround will take more time and investment, which the company plans to make as a private enterprise that will have less emphasis on quarter-to-quarter progress.

"Without having really the scrutiny that is associated with a publicly traded stock, we can make the necessary investment and stick to plan, in some cases be more aggressive than we can today," he said.

Rival PC makers were quick to dismiss Dell's move as disruptive, and one that will not be good for customers.

"Dell has a very tough road ahead," No. 1 PC maker Hewlett Packard said in a statement. "And with a significant debt load, Dell's ability to invest in new products and services will be extremely limited."

HP said leveraged buyouts tend to leave existing "customers and innovation at the curb" and HP plans to take full advantage of any disruption the move will cause among Dell's customer base.

Asian rival Lenovo said in a statement it was focused on products and customers "rather than distracting financial maneuvers and major strategic shifts."

Dell's founder and CEO, and private equity firm Silver Lake are paying $13.65 per share in cash for the buyout.

When asked if Dell plans to exit the PC business, Gladden said the board completed a review, and "this is where they ended up."

(Reporting by Poornima Gupta; editing by Matthew Lewis)

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