Dell Takeover Share Price Hits Ceiling as Rivals Falter

Most of the focus on Dell’s near-term prospects involve who will get the chance to resurrect its fortunes and thereby get billions of dollars in return. The major byproduct of this is that Dell’s shares have rallied above $14 recently. That is an increase of 30% this year, compared to the S&P’s gain of less than 20%. All through this period, Dell’s earnings have gotten worse, and they are expected to deteriorate for the balance of the year.

Dell and Icahn may have their eyes on one another, but they also see on the recent earnings results of Microsoft Corp. (NASDAQ: MSFT) and Intel Corp. (NASDAQ: INTC), as well as the likely disappointing results from Hewlett-Packard Co. (NYSE: HPQ). Microsoft’s results show that its PC-based Windows franchise has run its course in terms of growth, and it has been unable to help its prospects with hardware products. Intel’s report showed a related problem. Sales of its PC chips have started to fall apart. Management claims it will refocus on smartphones and tablets, but there has been almost no acceptance of the new products it has offered to those sectors.

The bitter fight over Dell shows an enthusiasm that Dell can be “reinvented,” to use a business school term. But, in theory, Michael Dell’s management of his company has been no better or worse than that of Intel or Microsoft. Investors blame Steve Ballmer for Microsoft’s ills. His defenders say that, with deep roots in the PC industry, the world’s largest software company never had the chance to make a challenge to other companies as the market evolved toward smaller devices. Dell’s defenders say that he did his best to work in a dying industry as well. Both sets of analysis continue to avoid the fact that each company could have seen the future coming but ignored it.

The future has come around to crush Microsoft, Intel, Dell and HP. They have little prospect of gaining ground in businesses that they failed to attack for several years. The offers for Dell will not rise at all, no matter how heated the fight between Dell and Icahn is. The company is not worth more than either side has offered. As a matter of fact, the winner may find that losing was a better deal.