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Dell submits proxy statement PC industry has fallen into downward spiral

Dell submitted a 274 page power of attorney statement to the securities and Exchange Commission on Friday, describing the bleak prospects of the company's business and PC industry, and elaborating on the reasons for accepting the $24.4 billion privatization offer of Michael Dell and Yinhu, a private equity investment fund.

In this document, many people involved in the privatization transaction, from Dell CFO to financiers, pointed out that the PC industry has fallen into a downward spiral, and it is increasingly difficult for Dell to expand its market share. These people strongly advocate that Dell needs to make significant changes, which makes the privatization offer of $13.65 per share reasonable.

As the founder and CEO of the company, Michael Dell is in an abnormal position and needs to belittle Dell's prospects to persuade shareholders to accept the current offer. Some big shareholders opposed the deal, saying Dell was worth more than that.

In the proxy statement, Dell outlined how the company failed to meet its internal revenue expectations for seven consecutive quarters. Between July 2012 and January 2013, Dell's revenue forecast for the current fiscal year fell by 15%, from the initial forecast of $66 billion to the 'conservative' forecast of $56 billion. Dell's board hired Boston Consulting Group to analyze the privatization offer, which expects Dell's revenue to decline every year from now until 2016.

According to the document, people related to the transaction have repeatedly mentioned such issues as weaker than expected user demand, lower PC sales and lower gross profit rate. Michael Dell told the board that the only way out is to change Dell's business model and invest heavily in new products and services. Michael Dell said at a meeting on December 6 last year: 'the implementation of this measure will require additional investment, which will lead to lower profits and greater volatility in the price of common stock. '

Michael Dell believes that if these measures are taken as a listed company, it will cause adverse reactions in the stock market, because these measures will lead to a decline in recent profitability, increase operating expenditure and capital expenditure, and also bring significant risks. '

Other regulatory documents submitted by Dell since the disclosure of the selfishness offer also show that the company's executives pointed out that Dell had considered splitting up or selling separately, but ultimately decided to retain the integrity of the company. Dell said that in any case, the privatization transaction will not have a negative impact on users or employees.

Alex Mandl, chairman of Dell's Special Committee on the board of directors, said on January 17: 'the company may need to hire a chief operating officer to ask Michael Dell a question about his plans if the privatization deal can't be carried out. Mandel also told Michael Dell that the board of directors needed an offer of at least $13.75 per share. At that time, Silver Lake's offer was $13.25 per share, which was immediately rejected. Then Silver Lake submitted three more offers, and Michael Dell promised to accept a discount on the value of his 14% shares. Finally, the two sides agreed to reach an offer of $13.65 per share.

The document also highlights the difficulties faced by Dell's business. Dell used to be the world's largest PC manufacturer, but the rise of smart phones and tablets has damaged the PC industry, and Dell continues to face competition from companies such as Lenovo, so the company is in a dilemma. Since 2009, Dell has spent $11.4 billion to acquire 18 companies in the field of storage and services, but the growth rate of these companies is not fast enough to offset the loss of Dell's core PC business.

For Dell, the document was submitted at a critical moment. The company is trying to persuade shareholders to approve the $24.4 billion privatization offer, while major shareholders such as southwest asset management company all opposed it, saying that the offers of Silver Lake and Michael Dell underestimated the value of Dell. On Monday, Dell's board's so-called 'bidding term' expired when the company announced a private equity bid

Blackstone and Carl Icahn, an activist investor, both told the special committee that they were interested in buying the company.