Icahn's Most Recent Increase in Dell
Corporate democracy does not exist. Critics of activism state that activism may be good for the activist but not for other stockholders. Yet shareholder value has risen by many billions of dollars in the companies we have targeted over the years. I believe this proves conclusively that all shareholders, not just us, benefit from our involvement…
Carl Icahn increased his position in Dell (DELL) this past week, making him the largest shareholder of the company. This buy signifies Icahn’s attempt to buyout the company. Icahn initially created his now massive position in Dell by purchasing 7 million shares of the company’s stock, and he has continued to increase that position.
On May 9, Icahn purchased an additional 73,468,322 shares, putting him at a total of 80,468,322 shares and making up 4.61% of the company’s shares outstanding. After this buy, Icahn became the second largest institutional shareholder, sitting only behind Mason Hawkins and Southeastern Asset Management who held 121,392,858 shares or 6.95% of the shares outstanding as of the end of the first quarter.
In his most recent increase, Carl Icahn increased his holdings in Dell by 89.49%. Icahn bought 72,010,328 shares for approximately $13.41 per share. The guru currently holds 152,478,650 shares of Dell, representing a 5.72% impact to his portfolio and 8.73% of the company’s shares outstanding. Since his buy, the shares are trading slightly up at $13.48 per share.
Icahn is now the second largest shareholder period. He sits behind Dell CEO Michael Dell who owns nearly 270 million shares of his company.
The Company offers a range of technology solutions, including servers and networking products, storage products, services, software and peripherals, mobility products, and desktop PCs. Dell sells its products and services directly to customers through dedicated sales representatives, telephone-based sales, and online sales, and through a variety of other sales distribution channels.
On June 12, Dell declared a quarterly cash dividend of $0.08 per share would be payable on July 22 to shareholders of the record as of the close of business on July 1.
On June 18, The Special Committee at Dell responded to Icahn’s second request of a buyout:
Mr. Icahn’s concept is not, in its present state, a transaction that the Special Committee could endorse and execute – there is neither financing, nor any commitment from any party to participate, nor any remedy for the company and its shareholders if the transaction is not consummated. In addition, the concept does not adequately address the liquidity issues and other risks the Committee previously highlighted.
Click here to read the full response letter.
On May 16, Dell reported its first quarter results which reported:
· Revenue was $14.1 billion, down 2% from the same quarter last year.
· GAAP earnings of $0.07 per share and non-GAAP earnings of $0.21 per share.
· Enterprise Solutions, Services and Software revenue up 12%
Dell has a market cap of $23.5 billion; its shares wre traded at around $13.45 with a P/E ratio of 12.60 and a P/S ratio of 0.40. The dividend yield for Dell stocks is 1.80%. The company had an annual average earnings growth of 5.4% over the past 10 years. GuruFocus rated Dell the business predictability rank of 3-star.
Dell’s historical P/S and P/B ratios:
Dell’s historical price and P/E ratio:
The Peter Lynch Valuation of Dell shows that it appears to be undervalued:
The analysis on Dell reports:
· The revenue has been in decline for the past year.
· The price is close to a 1-year high of $14.33.
· The P/S ratio is close to a 1-year high of 0.44.
· The company has issued $2.5 billion in debt over the past three years.
· The operating margin has shown signs of expansion.
· The dividend yield is close to a 1-year high
There are currently 24 gurus that hold positions in Dell. Click here to see their holding histories.