| SAN FRANCISCO
SAN FRANCISCO Feb 21 Hedge fund manager David
Einhorn had some sharp words on Thursday for both Dell Inc
and founder Michael Dell on his plan to take the
Einhorn, who has mounted a campaign to get Apple Inc
to share more of its $137 billion cash pile, used the
leveraged buyout of Dell as an example of a cash policy that is
Michael Dell has struck a deal to take private the No. 3
personal computer maker he created in a college dorm room in
1984. The founder is partnering with private equity house Silver
Lake and Microsoft Corp but the $24.4 billion deal is
being opposed by some of Dell's major shareholders, including
Southeastern Asset Management, which said the deal substantially
undervalues the company.
Now, Einhorn - an influential voice on Wall Street - is
expressing his disgust.
"Dell's go-private effort shows the disingenuous nature of
hoarding cash," he said during a conference call where he
detailed the benefits of distributing perpetual preferred stock
- his favored way of rewarding shareholders of Apple.
The 44-year-old hedge fund manager, who made his name and
fortune by predicting the collapse of Lehman Brothers, said his
firm was a large shareholder of Dell last year but sold the
shares after he found the company's capital allocation strategy
Einhorn said he made the decision to sell after he was told
Dell's foreign cash couldn't be repatriated and domestic cash
was needed for strategic acquisitions and other operational
Attributing the slide in Dell's shares to the frustration of
shareholders, he said the depressed price of the stock created
an opportunity for Michael Dell.
"Michael Dell probably didn't mind the stock falling," he
said. "Now he wants to take Dell private and, voila, the balance
sheet will be fully utilized to finance his purchase of the
Einhorn said, "At least some of the untouchable foreign cash
- take a deep breath - is set to be repatriated," adding that
Dell's cash-rich balance sheet will become highly levered with
the buyout deal.
A Dell spokesman did not have immediate comment.
Memphis-based Southeastern Asset has offered several
alternatives to the deal that it said would produce a better
outcome for public shareholders, including borrowing money to
make a major share repurchase or breaking up the company and
selling the units separately.
While Michel Dell and his investment firm are contributing
$750 million in cash toward the $24.4 billion purchase of Dell
along with $1 billion from Silver Lake, the PC maker is also
targeting the repatriation of $7.4 billion of cash now parked
abroad to help finance the deal.
A hefty tax is usually levied on cash brought back from
"In other words (Dell) management actions show that when it
is our money, it needs to be held conservatively and reserved
for strategic flexibility," Einhorn said. "But when it is their
money, they don't need so much rainy day cash and they would
like to see the balance sheet working harder to generate the
maximum return on equity."