Blackstone Group is dropping its effort to acquire the computer maker Dell, citing slumping personal computer sales and Dell's "rapidly eroding financial profile."
Blackstone and its partners said in a letter to Dell Inc. that they have ditched a plan to buy most of Dell's outstanding stock for $14.25 per share due those challenges, which surfaced after the bid was submitted last month.
The letter from the group to a special committee of Dell board members was disclosed Friday.
The letter said that while the bidders still believe Dell is "a leading global company with strong market positions," it also said that Dell has lowered its operating income forecast for this year to $3 billion from $3.7 billion.
The withdrawal of the Blackstone-led bid leaves Dell with a $24.4 billion offer -- $13.65 per share -- from a group that includes its founder and CEO Michael Dell that would take the company private and a preliminary proposal from billionaire investor Carl Icahn to buy a majority of Dell stock while keeping the technology company publicly traded.
Icahn plans to pay up to $15 per share for 58 percent of Dell's stock.
Shares of Dell fell 47 cents, or 3.4 percent, to $13.48 in Friday morning trading.
When asked about Blackstone's characterization of Dell's financial profile, spokesman David Frink said in an email the company remains focused on its customers and "providing innovative products."
A spokeswoman for New York-based Blackstone declined any additional comment on the decision.
Blackstone's about-face came amid more evidence of the deteriorating conditions in the PC market as more technology spending shifts to smartphones and tablet computers. Worldwide PC shipments plunged by 14 percent in the first three months of the year, according to International Data Corp., the steepest quarterly decline during the 19 years that the research firm has been tracking the market.
Dell's PC sales slipped 11 percent during the quarter, leaving it as the world's third largest maker of laptop and desktop machines.
Michael Dell believes he can turn around the company by diversifying into more profitable niches such as business software, data storage and consulting. It could be a wrenching process, something that Michael Dell believes he will be able to do if he doesn't have to worry about Wall Street's fixation on short-term results.
In a show of confidence in his plan, Michael Dell is contributing $4.5 billion of his cash and stock to the proposed buyout. Loans would provide most of the rest of the financing.
Dell, based in Round Rock, Texas, agreed earlier this year to sell itself to Michael Dell and a group of investors led by Silver Lake Partners for $13.65 per share. But key shareholders have been unhappy about that offer, and competing bids have since emerged.
Dell's stock had been trading above the price in the Michael Dell offer for most of the time since that deal was announced in early February, indicating that investors were betting on the emergence of a better offer.
The board special committee has said it believed Blackstone's proposal could be more lucrative than the deal struck with Michael Dell and Silver Lake. But the committee wanted to review the formal terms of Blackstone's bid before making a final assessment.
Dell has agreed to cover up to $25 million in expenses that Blackstone incurred while exploring its bid.