Dell\'s Waning Cash Flow, Signs of Concern

¶ … Dell's Waning Cash Flow, Signs of Concern" attempts to elucidate the reasons behind the purported deal of Dell -- a computer company -- to go private after existing for years as a company with publicly traded stock. As such, the author explores a number of scenarios that may have influenced Dell founder Michael S. Dell's decision to go private. He discusses both the benefits and the negatives associated with a private company, and attempts to offer the reader insight into the financial prowess -- or lack thereof -- of this particular organization.

The premise that the article is based on is that Dell and Silver Lake (an investment firm) are considering a $24 billion deal to go private due to inefficient marketplace performance and declining interest in stock investors. However, one of the chief tenets that Eavis contends that is spurring this deal is the fact that Dell allegedly has a shrinking cash flow. The author states that during the most recent fiscal year, the company's free cash flow was 2 billion dollars less than it was during the previous fiscal year. He simultaneously alludes to the fact that Dell is fortunate to have closed out the current fiscal year with a free cash flow at $2.77 billion, while alluding to the fact that it may have other cash flows (such as its "large pool of overseas cash" (Eavis, 2013) to justify a purchase well over $24 billion.

Another central premise of Eavis' article is that Dell is on the brink of desperation due to it waning (free) cash flow, and that going private could either make or break the company. In the event of the former, he emphasizes that going private can significantly reduce an organization's costs. In the event of the former, he propounds the notion that the additional interest Dell will incur as a private entity could drain its free cash flow even more, leaving it in considerable financial jeopardy.

In reading this article, it was fairly clear that the author was privy to a host of inside information about Dell and its financial standing. Also, it is desirable of most articles and of journalism in general to present a balanced view of their subject. However, the primary drawback of this article is that the author makes too many contradictions, and leaves the reader with little understanding as to where in fact Dell actually stands. Other sources, however, alludes to Michael Dell's success in achieving his company's buyout (Bary, 2013).

An excellent example of this fact is the information the author provides about the cash flow of the computer company. He devotes a great deal of the article to discussing how Dell's free cash flow is all but dissolving, is not nearly as much as it was the year before, and is "weakening" (Eavis). Yet he readily states near the end of the article that the company has sufficient cash flows to validate a purchase exceeding $24 billion dollars, and indicates that it has a substantial amount of reserves in foreign cash as well. These sorts of contradictions leave the reader wondering as to whether or not Dell really is in as desperate of straights as the author implies it is in at the beginning of the article.

The effect of this sort of contradictory analysis is that the reader gets the impression that the author may not be as knowledgeable about this subject as he or she appears to be. There are no quotations from any sources in the article, which lessens the conviction of the author even in proclaiming basic facts, such as how much cash flow Dell allegedly had the year before. On a basic level, these sorts of equivocations can be expected. The author is, after all, writing about deal that may or may not happen, and he is going a step further by attempting to discern just what sort of affect this deal will have on the company. None of these things are facts, and as such he cannot be expected to write about them in a factual way. However, his dearth of usage of facts in supporting basic elements of this piece leaves the reader doubtful about the authenticity of the information disseminated within the article.

This article is extremely relevant to the field of financial management in a number of different ways. Foremost among these ways is the fact that it details the differences -- both the pros and the cons -- associated with a private company vs. one that has stock that is publicly traded. The author explains that the negative aspects of a private company include a "liberation to spend more on initiatives…which would use up cash" (Eavis, 2013) as well as additional interest charges. Positives associated with a private company include a reduction of costs.