Long Battle for Dell Ends in Victory for Founder

Michael S. Dell started the personal computer company in his dorm room nearly 30 years ago. Ben Sklar for The New York TimesMichael S. Dell started the personal computer company in his dorm room nearly 30 years ago.

After months of hurdles, Michael S. Dell is finally poised to buy full control of the company that bears his name, in his biggest move yet to turn around the computer maker’s fortunes as its industry goes through tectonic shifts.

But a newly private Dell will most likely look much like the current one.

“Dell already has a foundation” in important trends like cloud computing and Big Data, Mr. Dell said on Thursday. “I remain optimistic and passionate about the company.”

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With shareholders formally approving the company’s sale to Mr. Dell and the investment firm Silver Lake Partners for $24.9 billion earlier in the day, the task now lies in what the founder described as optimizing the company’s current form.

It is an effort that has been closely watched in the tech industry, where longtime fixtures from Microsoft to Hewlett-Packard are struggling to adapt to the rise of mobile devices and the explosion of new Internet-based services.

Over the last five years, Mr. Dell said in an interview, he has moved to shift Dell from primarily making personal computers, an ever more difficult business, toward providing software and services for corporate clients.

Investors, though, have displayed little patience with the campaign. Dell shares fell more than 30 percent over the five years before the company announced its sale plans in February. According to the technology research firm Gartner, worldwide demand for personal computers fell 11 percent in the second quarter of this year. Last month, Dell reported revenue of $14.5 billion for its second fiscal quarter, with a 72 percent drop in net income.

Mr. Dell and Silver Lake say that they intend to be much more patient. Dell has already made more than $13 billion in acquisitions, primarily of software and networking companies, to build a services arm aimed primarily at small and medium-size businesses, long a core market for Dell.

Their time horizon, they say, is the medium to long term.

Police guarded a meeting of Dell shareholders in Round Rock, Tex., on Thursday.Jay Janner/Austin American-Statesman, via Associated PressPolice guarded a meeting of Dell shareholders in Round Rock, Tex., on Thursday.

“This is not just beachfront property; it’s a chance to own an island,” Egon Durban, a senior executive at Silver Lake, said in the interview. “This isn’t a broken business.”

Taking Dell private, they contend, removes many of the headaches of running a public company, particularly having a highly visible stock price that investors take as a measure of health. With just themselves to report to, their argument goes, the company can afford to bide its time and take on more risk.

“We’re the world’s largest start-up,” Mr. Dell said, while Mr. Durban likened the leveraged buyout to a “ ‘Pulp Fiction’-like adrenaline shot to the heart.”

Others are skeptical that the company can handle the amount of new debt it will assume in going private. Standard & Poor’s cut Dell’s credit rating to junk status on Wednesday, citing concerns that the new burden will reduce the computer maker’s ability to invest in its businesses.

Dell’s chief financial officer, Brian Gladden, said in a conference call with analysts on Thursday that the company could handle its debt obligations, which he said amounted to less than $20 billion.

With much of his wealth now directly connected to Dell’s fortunes — he is pouring about $750 million of his estimated net worth of $15.3 billion into the deal, along with rolling over his 16 percent stake — Mr. Dell said that he was “absolutely” prepared to invest more into the company he founded in his dorm room nearly 30 years ago.

Both men conceded that getting to Thursday’s vote was a difficult process filled with tough negotiations. Even before word of the deal began to emerge in late January, advisers to a special committee of Dell’s board had been battling with Mr. Dell and Mr. Durban over how much they would pay for the company, with more than a week spent just on eking out an extra nickel per share from the would-be buyers.

And in the spring, the billionaire Carl C. Icahn and the asset management firm Southeastern Asset Management, criticized the takeover bid as too low and mounted an increasingly bitter fight to derail the deal. Mr. Icahn regularly pilloried Mr. Dell, frustrating both the buyer group and company officials who felt restricted in what they could say.

Still, that opposition eventually led to a bump in price, to $13.88 a share from $13.65 a share. Mr. Icahn’s campaign ended last month, when a Delaware court rejected a last-minute effort by Mr. Icahn to overturn changes to Dell’s voting rules that eased the path to a victory for the buyers.

Though some shareholders have still grumbled that the price Mr. Dell and Silver Lake will pay — $13.75 a share in cash, along with a special dividend of 13 cents — is too low, Mr. Dell defended the price as fair.

“At the end of the day, shareholders get some of the upside with none of the risk,” he said.

Thursday’s vote on the deal betrayed little of the preceding drama. Mr. Dell entered smiling, as did advisers like James B. Lee Jr., the top JPMorgan Chase deal maker who aided the Dell special committee. Within 15 minutes, the meeting was over, with roughly 65 percent of votes cast for the transaction, according to a person briefed on the matter.

Mr. Dell celebrated the victory with a big barbecue at his house, according to people with knowledge of the matter. But he said that much hard work remains.

When asked how significant the leveraged buyout will prove in the history of Dell, he said, “It’s a better question a couple of years from now.”