Obligations and Motivations in the Battle for Dell

Leon Cooperman, the billionaire investor and longtime Wall Street denizen, was railing on Monday about the deal of the moment: Michael Dell’s $24 billion effort to buy out the troubled computer maker he founded.

“Management-led buyouts are a giant case of inside trading by management against their own shareholders,” Mr. Cooperman told me, continuing: “Dell has a moral responsibility to work for his shareholders.

“He’s not doing this because he thinks his company is overvalued. He wants to make money.”

The battle over Dell, which turned into a three-way tug of war over the weekend with the addition of competing bids from both the Blackstone Group and Carl C. Icahn, has put into focus the question â€" and perhaps the answer â€" of whether management-led buyouts are good or bad for shareholders.

Unlike Mr. Dell’s offer, in which he joined with Silver Lake Partners to take the company out of the public markets, Blackstone and Mr. Icahn proposed deals that give public shareholders the option to cash out or to continue to own a stake.

“We see no reason that the future value of Dell should not accrue to all the existing Dell shareholders â€" not just Michael Dell,” Mr. Icahn, always bracing for a fight, said in a statement.

The thinking among some shareholders has been that Mr. Dell must know something that public investors don’t â€" and that his deal is an effort buy the company on the cheap and sell it back to the public for even more money in a couple of years. As Ben Stein, the market observer, wrote in Barron’s recently, “These insiders know far more about the company’s value than we little fish.”

David Einhorn, the hedge fund manager, went so far as to suggest, perhaps cynically, that the swoon in Dell’s stock price in the second half of 2012 may not have been unwelcome inside the company.

“Michael Dell probably didn’t mind the stock falling,” Mr. Einhorn said on a conference call with investors recently. “For him, it created an opportunity. Now, he wants to take Dell private, and voilà!”

Comments like Mr. Einhorn’s reflect a shifting ethos on Wall Street, one that might be slightly less short-term greedy than that of previous generations of investors who typically would have taken the money offered as part of leveraged buyout and run. It appears that some shareholders of companies involved in buyouts would prefer to ride a wave of gains alongside the buyout kings rather than cash out immediately.

Southeastern Asset Management, one of Dell’s largest shareholders, which has declared it would block Mr. Dell’s original offer, said it was “pleased that the alternative proposals submitted to the Dell Special Committee are structured to give shareholders the opportunity to continue to participate in the company’s future prospects, while also providing a higher cash component for shareholders who choose to exit their investment.”

In fairness, it must be said that Southeastern is severely underwater on its investment in Dell â€" it bought its shares at an average price of $16.90 â€" so it has little to lose by taking this position.

But the offers by Blackstone and Mr. Icahn (his offer is being taken less seriously by the market) reflect the shifting mood of long-term investors by offering them a seat at the table and could become a trend in the way private equity firms approach buyouts in the future.

Mr. Dell has indicated to executives inside Dell that he is open to working with Blackstone, people close to him said on Monday, perhaps jumping ship from Silver Lake if Blackstone’s bid is deemed superior.

Both of the new offers open up the possibility of all three bidders buying a majority of the company, while leaving a small minority of shares â€" called a stub in Wall Street parlance â€" in the public market. In some ways, the shift is an ironic about-face for private equity firms, which have long evangelized on the merits of taking companies private that are in need of a turnaround and have spoken derisively about the pressures of the public markets.

Stephen Schwarzman, the co-founder of Blackstone, told Businessweek back in 1996 that C.E.O.’s are “not able to do some of the things they know should be done to fix their companies. If it requires their earnings to be depressed for two or three quarters or write-offs, they’d rather, in many cases, not do the right thing, because if they do the right thing, they’ll be penalized by their shareholders.”

When Mr. Dell made his bid to acquire his firm in February, with the backing of Silver Lake Partners, he made it clear that he, too, believed that it would be better to work on a turnaround of the company behind closed doors.

“Dell has made solid progress executing this strategy over the past four years, but we recognize that it will still take more time, investment and patience, and I believe our efforts will be better supported by partnering with Silver Lake in our shared vision,” he said in a statement.

Now that Blackstone and Mr. Icahn have emerged with preliminary stub offers, Mr. Dell may have to get used to executing his strategy in the daylight as a semipublic firm, with all the requisite disclosures that he was trying to avoid.

As for whether Mr. Dell was trying to steal the company from shareholders, if the battle for the company proves anything, he may have helped shareholders rather than hurt them. (And frankly, it may hurt him in the end, for it is possible he may inadvertently lose control of the company by trying to take it private.)

Forgotten in the war of words over this transaction is the fact that Dell’s shares traded at about $8 just four months ago. (They closed at $14.51 on Monday.)

It is a personal computer company at a time when tablets and mobile computing are the new thing. It is hard to argue that Dell is not in deep, deep trouble, after it reduced its forecast for fiscal 2013 from $5.6 billion in operating income over the summer to just $3.7 billion in January. People close to the company say that it is expected to reduce its forecast to $3 billion this week.

And while Blackstone’s bid is worth $14.25 a share, that’s just 60 cents more a share than Mr. Dell’s offer of $13.65, hardly a robbery.

To its credit, Dell’s special committee and its advisers did a herculean job of pushing to bring in new bidders with higher offers, especially since most observers â€" including this columnist â€" considered the deal with Mr. Dell to be a fait accompli. And, in truth, most “go shops” â€" a provision of some merger agreements that allow companies to continue shopping themselves after agreeing to a deal â€" are considered simply an artifice.

For shareholders of Dell, the ultimate test of the deal’s success or failure won’t be in the coming weeks and months when a final victor is chosen by the company’s board. The verdict will be in the value of Dell in five years from now and whether the current public shareholders have profited.

But shareholders beware: Back in 2007, two private equity firms sought to take Clear Channel, the radio and outdoor advertising company, private. Some shareholders balked and said they wanted to be able to participate in the upside of the deal, fearing that the offer price was too low and the “smart money” must have a secret plan.

The shareholders got what they wished for: the private equity firms revised their offer to allow shareholders to keep their stake. And what happened to its value It has dropped nearly 84 percent.

Puerto Rico Creates Tax Shelters in Appeal to the Rich

Known for its white-sand beaches and killer rums, Puerto Rico hopes to stake a new claim: tax haven for the wealthy.

Since the beginning of the year, the island has gone on a campaign to promote tax incentives that took effect last year, marketing its beautiful beaches, private schools and bargain costs in an effort to lure well-heeled hedge fund managers and business executives to its shores.

So far, Puerto Rico’s pitch has attracted a handful of under-the-radar millionaires. Several American executives of mostly smaller financial firms say they have already relocated to the island, and Puerto Rican officials say another 40 persons, mostly from the United States, have applied.

The tax savings could add up to “at least in the six figures” each year, said Barry Breeman, an American who said he was moving to Puerto Rico with his wife. Mr. Breeman is the co-founder of the New York-based Caribbean Property Group, a real estate investment firm that has substantial holdings on the island.

Millionaires are nice, but Puerto Rican officials hope to reel in billionaires like John A. Paulson, the hedge fund manager who Bloomberg News reported earlier this month was weighing a move.

The attention prompted an unusual statement from Mr. Paulson, which declared that he was not relocating. (Still, Mr. Paulson, a 57-year-old New Yorker, had briefly considered a move, say two people with knowledge of his plans.)

If not Mr. Paulson, government officials and real estate brokers in Puerto Rico hope to sell other wealthy mainland Americans on what they hope will become the next Singapore or Ireland as a favored low-tax destination. Puerto Rico is closer and, compared with Ireland, decidedly warmer. And unlike in Switzerland or other havens, in Puerto Rico, Americans do not give up their citizenship.

“There’s nothing wrong with spending 183 days a year on a sailboat or yacht and working from here,” said Alberto Bacó Bagué, the secretary of economic development and commerce for the island, in a telephone interview. “We’re catching up to Ireland and Singapore â€" you can shelter income legally, and legally in a good way.”

Puerto Rico is a commonwealth of the United States, but for tax purposes, it is treated differently. Most residents of Puerto Rico, with the exception of federal employees, already pay no federal income tax. A person needs to live 183 days a year on the island to become a legal resident.

The new tax breaks are a twist on the island’s tradition of using tax perks to bolster the economy. Puerto Rico’s per-capita income is around $15,200, half that of Mississippi, the poorest state in the nation. In 2006, a previous incentive exempting United States companies from paying taxes on profits from Puerto Rican manufacturing ended after Congress said that the incentive had bilked taxpayers.

The new tax breaks are a radical shift in that they focus on financial, legal and other services, not manufacturing. Puerto Rico slashed taxes on interest and dividends to zero from 33 percent, and it lowered taxes on capital gains, a major source of income for hedge fund managers, to zero to 10 percent.

The incentives work with existing United States breaks. While residents still have to file a federal tax return, they do not have to pay capital gains taxes of 15 percent on assets held before moving and sold after 10 years of island residency.

The new tax incentives “likely will be considered more broadly by some taxpayers as a new opportunity for income shifting and tax deferral,” said Michael Pfeifer, an international tax lawyer at the law firm Caplin Drysdale in Washington.

Mr. Bacó, the Puerto Rican economic development official, is planning a road show on the East Coast next month to woo financial and law firms as well as wealthy individuals to moving to Puerto Rico.

Because of its new aggressive tax breaks, Puerto Rico is a supercharged version of Florida, which does not tax individuals on ordinary income.

Recently, a business development group in Palm Beach, Fla., wined and dined 10 executives from the Northeast who had flown in for a two-day tour showcasing the state’s tax advantages, complete with golf outings, showings of oceanfront office space and a soiree aboard a yacht.

Florida has already landed one big fish: Edward S. Lampert of ESL Investments moved his headquarters from Greenwich, Conn., to near Miami last year.

The sales pitches by Florida and Puerto Rico tap into a growing resentment among affluent people who feel that they have been vilified by politicians or believe they have unfairly become targets for disproportionately higher taxes. In one highly publicized example, the actor Gérard Depardieu, angry over a plan by the French government to raise taxes to 75 percent for the wealthy, accepted a Russian passport from President Vladimir V. Putin. Russia has a flat tax rate of 13 percent.

But a move to Puerto Rico may be easier said than done. Privately, some lawyers and accountants in the United States express concern that individuals who move to the American island for its lower taxes might appear “unpatriotic” in a widening crackdown by authorities on offshore tax dodging through Switzerland, Israel and Singapore.

And while the island’s tax breaks are legal, some investors say they do not want their hedge fund managers straying too far from their mainland office.

“Citi Private Bank expects hedge fund principals to be in a primary office with their critical employees close by,” David Bailin, the global head of managed investments for the firm, wrote in an e-mail.

Puerto Rico has been battered by several years of recession. Its unemployment rate is more than 13 percent, well above the national rate, and its economy remains mired. In December, Moody’s Investors Services downgraded the island’s debt to one notch above junk status; and in a recent research note, Breckenridge Capital Advisors said the island was “flirting with insolvency.” The island has the weakest pension fund in America and by some estimates could run out of money as soon as 2014.

An influx of wealthy financiers would provide a much-needed lift to the economy.

Margaret Pena Juvelier is a real estate broker with Sotheby’s International Realty who left the Upper East Side last fall to open an office in San Juan. “We’re getting an average of 10 to 15 calls or e-mails a day from people who want to look at homes,” she said.

Ms. Juvelier often sends a black S.U.V. with a driver in a suit and tie to meet clients, some of whom fly in on private jets and pepper her with questions like “is there a Whole Foods here” and “if I get really sick, do I have to be medevaced”

Nicholas Prouty of the investment fund Valivian Advisors, who is moving to San Juan from Greenwich, Conn., said he wanted “the excitement of having new experiences coupled with the worry of the unknown.”

While the real estate broker Ana González Brunet declines to name names, saying “discretion to billionaires is important,” she said multiple individuals had recently looked at the 8,379-square-foot penthouse in the Acquamarina in the chic Condado neighborhood of San Juan. The $5 million condo has underground parking and a panoramic view of the ocean through floor-to-ceiling windows, and is near luxury boutiques like Cartier, Salvatore Ferragamo and Louis Vuitton.

“It’s like being in the best part of Manhattan,” Ms. González Brunet said.

China Dream, Apple Nightmare

President Xi Jinping of China is on his inaugural overseas trip. Mr. Xi stopped first in Russia, went to Tanzania, and will then  visit the Republic of Congo and South Africa, where he will also attend a summit meeting of the BRICs nations.

His visit to Russia yielded “breakthrough” oil deals, an agreement to buy 24 Su-35 fighters and four Lada-class submarines, a commitment to strengthen defense ties and a pledge for more cooperation on tourism. The Chinese and Russian leaders apparently got along quite well, as Mr. Xi told President Vladimir Putin that their “souls are open to each other”.

China and Russia have a history of mutual distrust and we should view the happy talk of closer ties with some skepticism, though dismissing it as a “nothingburger of an event” may be a bit too flip. The two countries have many shared interests, including a desire to stymie U.S. influence and, for China at least, counter the U.S. “pivot” to Asia.

Mr. Xi visits Africa with trade between China and the continent worth more than $200 billion a year. In Tanzania on Monday he said China wanted a “relationship of equals,” remarks aimed at countering the growing sentiment that China is exploiting the continent. At the BRICS meeting Mr. Xi may “endorse plans to create a joint foreign exchange reserves pool” that theoretically could help emerging market countries lessen reliance on the World Bank and International Monetary Fund.

Peng Liyuan, the president’s wife, has been an unexpected star of the trip. Mrs. Peng, a singer who holds the rank of major general in the People’s Liberation Army  and is known for her patriotic songs, is China’s most glamorous and public first lady in a long time. Pictures of her on the trip lit up Chinese social media and her fashion choices, all Chinese brands, should be both a boon to the designers and a message to other Chinese officials and their spouses that homegrown brands are more appropriate than foreign, luxury ones.

The “Chinese Dream” is a concept that the new leadership has been promoting, both domestically and internationally. The domestic version ties together national rejuvenation, improvement of people’s livelihoods, prosperity, construction of a better society and military strengthening as the common dream of the Chinese people that can be best achieved under one party, Socialist rule.

The official, global version of the Chinese Dream:

will benefit not only the Chinese people, but also people of all countries. The Chinese dream is not a call for revanchism and Chinese nationalism at the expense of its neighbors. It is the dream of China, which once suffered invasions and turmoil, to maintain lasting peace.

Continued economic growth is the sine qua non of the Chinese Dream. A new report by the Organization for Economic Cooperation and Development  forecasts that China’s economy can continue grow at 8 percent a year through 2020 if it enacts many of the reforms that Beijing has already repeatedly said it intends to. At the China Development Forum held in Beijing over the weekend, the vice premier and Politburo standing committee member, Zhang Gaoli, reiterated the government’s resolve in pushing through difficult reforms.

Stable relations with the United States are also important to the realization of the Chinese Dream. Perhaps to underscore that although Mr. Xi’s first, heavily publicized overseas trip is to Russia and Africa, Monday night’s CCTV Evening News broadcast showed Henry Kissinger meeting with Premier Li Keqiang and former Secretary of Defense William Cohen meeting with Mr. Zhang. Premier Li stressed the importance of the U.S.-China relationship and reiterated China’s desire for a “new type of great power relationship” while the vice premier pledged fairness for foreign companies.

APPLE MAY WANT TO TAKE MR. ZHANG UP on his fairness pledge. On March 15 CCTV claimed that Apple’s support policies discriminate against Chinese consumers. Last week Xinhua bemoaned the mindless consumption of Apple products by Wuhan students in “Apple pursuit lures 20,000 students into high-interest loans.” And Monday morning The People’s Daily lambasted the company for both its support policies and its public relations response, even going so far as to mock the response with a cartoon.

As of last quarter China is Apple’s second biggest and fastest-growing market. It is not clear if these official media attacks are part of a broader attack on an American company whose size and success may make Beijing uncomfortable.

In the United States, you would never see a government official using a Huawei device, but a fair number of Chinese ones use Apple products. So far there have not been official media calls for government workers to stop using Apple devices, though the ongoing crackdown on corruption may have dented purchases of iPhones and iPads intended for gifts.

When Apple reports earnings April 23 we should learn if Apple’s Chinese dream is still on track.

Suit Offers a Peek at the Practice of Padding a Legal Bill

Lawyers at DLA Piper, the world’s largest law firm, joked with each other about the size of a client’s bill, in one instance describing their work on the assignment, according to e-mails attached to a court filing, as “churn that bill, baby!”

The e-mails provide a window into the thorny issue of law firm billing. Legal ethics scholars who have reviewed the documents say that they are likely to reinforce a perception held by many corporate clients â€" and the broader public â€" that law firms inflate bills by performing superfluous tasks and overstaffing assignments.

DLA Piper’s internal correspondence was disclosed in a fee dispute between the law firm and Adam H. Victor, an energy industry entrepreneur. After DLA Piper sued Mr. Victor for $675,000 in unpaid legal bills, Mr. Victor filed a counterclaim, accusing the law firm of a “sweeping practice of overbilling.”

Mr. Victor’s feud with DLA Piper began after he retained the firm in April 2010 to prepare a bankruptcy filing for one of his companies. A month after the filing, a lawyer at the firm warned colleagues that the entrepreneur’s bill was mounting.

“I hear we are already 200k over our estimate â€" that’s Team DLA Piper!” wrote Erich P. Eisenegger, a partner at the firm.

Another DLA Piper lawyer, Christopher Thomson, replied, noting that a third colleague, Vincent J. Roldan, had been enlisted to work on the matter.

“Now Vince has random people working full time on random research projects in standard ‘churn that bill, baby!’ mode,” Mr. Thomson wrote. “That bill shall know no limits.”

A DLA Piper spokesman said the firm did not comment on pending litigation.

Law professors said that it was highly unusual to find documentary evidence of possible churning â€" the creation of unnecessary work to drive up a client’s bill.

Stephen Gillers, who teaches professional responsibility at New York University Law School, called the e-mails a troubling example of lawyers’ flip attitudes toward a client’s escalating fees. And he noted that they had come to light at a time when corporations are increasingly rejecting the billable hour standard and becoming vigilant about controlling skyrocketing legal expenses.

“Even if these lawyers were engaging in late-night venting or banter, the e-mails are bad for the image of the firm and the profession,” Professor Gillers said.

William G. Ross, a law professor at Samford University’s Cumberland School of Law who specializes in billing ethics, said that the DLA Piper e-mails appeared to support what several of his studies had shown: that churning, while not endemic, is an insidious problem in the legal profession.

In a survey of about 250 lawyers that Professor Ross conducted in 2007, more than half acknowledged that they sometimes performed pointless assignments â€" like doing excessive legal research and extraneous document review or filing frivolous motions â€" to increase their billable hours. There is also the issue of “featherbedding,” he said, or throwing armies of bodies at every problem.

“Lawyers sometimes conflate their own financial interests with the interests of the client who pays the bills,” Professor Ross said. “Of course, most lawyers are ethical, but the billable hour creates perverse incentives.”

The three DLA Piper lawyers who wrote the e-mails have since left the firm. Mr. Eisenegger and Mr. Roldan, who now work for other law firms, did not respond to requests for comment. Mr. Thomson, now a government lawyer, declined to comment. Their departures had nothing to do with the Victor case, according to people briefed on the matter.

The fee dispute centers on DLA Piper’s representation of Mr. Victor in a Chapter 11 filing for one of his holdings, Project Orange Associates, the operator of a power plant in Syracuse that provided steam to Syracuse University. Mr. Victor, the chief executive of TransGas Development Systems, which is based in New York, said that his fight over the Project Orange bill was culmination of a relationship that had deteriorated over the last decade as DLA Piper undertook a breathtaking expansion.

He said that when he first started working with DLA Piper in the late 1990s, the firm was a modest size and went by the name Piper Rudnick. Mr. Victor had a point person at the firm, Nicolai J. Sarad, a partner in the energy industry practice.

But as DLA Piper grew, Mr. Sarad began spending less time on his assignments, Mr. Victor said. Mr. Sarad did not respond to a request for comment.

Through acquisitions, joint ventures and the aggressive hiring of partners from other firms, DLA Piper has grown into a global monolith of 4,200 lawyers in more than 30 countries, making it the world’s largest firm by lawyer count. Last year, it posted revenue of $2.25 billion, according to The American Lawyer magazine.

“As the firm got bigger, there were all of these lawyers who I didn’t know suddenly showing up on my bills,” Mr. Victor said.

He said he was particularly irked by the routine practice of DLA Piper partners farming out assignments to the firm’s junior lawyers. He complained that this resulted in higher bills and often subpar work.

Internal DLA Piper e-mails from the Project Orange bankruptcy appear to corroborate that criticism. Lawyers on the case openly discussed the inefficient use of junior lawyers, who are known as associates. Mr. Thomson, a DLA Piper lawyer, wrote that although the firm had reduced the amount of a bill for Mr. Victor, he expected his fees to escalate.

“DLA seems to love to lowball the bills and with the number of bodies being thrown at this thing it’s going to stay stupidly high and with the absurd litigation P.O.A. has been in for years it does have lots of wrinkles,” Mr. Thomson wrote.

Later, Mr. Thomson complained that DLA Piper associates were taking too long to complete assignments. “It took all of them four days to write those motions while I did cash collateral and talked to the client and learned the facts,” Mr. Thomson wrote. “Perhaps if we paid more money we’d have skilled associates.”

The e-mails were included in the 250,000 pages of documents that were turned over to Mr. Victor by DLA Piper as part of pretrial discovery in the case. Mr. Victor said that the e-mails confirmed his worst suspicions.

His lawyer, Larry Hutcher at Davidoff Hutcher & Citron, amended the countersuit last week to include a fraud claim and a request for $22.5 million in punitive damages, a number representing 1 percent of DLA Piper’s reported revenue last year.

“For the past decade, I have fought with DLA to reduce their legal bills,” Mr. Victor said. “And now I’m going to keep on fighting.”

Rengan Rajaratnam Pleads Not Guilty to Insider Trading Charges

Rengan Rajaratnam pleaded not guilty on Monday to insider trading charges, coming nearly two years after the conviction of his older brother, the fallen hedge fund titan Raj Rajaratnam.

Appearing in Federal District Court in Manhattan, Rengan denied accusations that he conspired with his brother Raj to illegally trade technology stocks while he worked for his brother’s firm, the now-defunct Galleon Group. Prosecutors say that Rengan Rajaratnam made about $1.2 million on the trades.

During Raj Rajaratnam’s trial, prosecutors played several wiretapped conversations between the two brothers. Among the stocks that the Securities and Exchange Commission said that Rengan and Raj swapped confidential information about were Hilton Hotels, Polycom, and Akamai Technologies.

The United States attorney’s office unveiled charges against Rengan, 42, last week, but federal authorities were unable to arrest him because he was in Brazil. Over the weekend, he flew back to the United States voluntarily and was taken into custody by F.B.I. agents when he landed Sunday at John F. Kennedy International Airport.

David Tobin, a lawyer for Rengan, did not immediately respond to a request for comment.

Judge Naomi Reice Buchwald released Rengan Rajaratnam, a United States citizen born in Sri Lanka, on $1 million bail and had him surrender his passport. His next court appearance was set for June 4.

Rengan is one of about 30 people charged in the investigation of Galleon. He faces up to 25 years in prison, but is likely to receive a sentence well below that. Raj, who orchestrated the vast insider trading conspiracy, is serving an 11-year sentence at a federal prison in Ayer, Mass., though he is appealing his conviction.

“Rengan Rajaratnam and his brother shared more than DNA,” Preet Bharara, the United States attorney in Manhattan, said last week. “Along with his brother Raj, Rengan Rajaratnam was allegedly at the heart of an insider-trading scheme that swept up an unprecedented number of people.”

Rengan, a graduate of the University of Pennsylvania and Stanford University‘s business school, worked at a number of Wall Street firms, including Morgan Stanley and SAC Capital Advisors, before joining Galleon.

Though the government allegations portray Rengan as a bit player in his brother’s insider trading ring, he played a key role in the government’s multiyear investigation of illegal conduct at hedge funds.

During the nascent stages of the inquiry, which has led to criminal charges against more than 75 people, federal securities regulators began investigating Sedna Capital, a small hedge fund run by Rengan from 2003 to 2004. E-mails and instant messages between the two brothers that suggested the possible exchange of secret corporate information.

During Raj’s trial, the jury heard several secretly recorded calls between Rengan and Raj, including one from August 2008 during which Rengan told his brother about his efforts to press a friend, a consultant at McKinsey & Company, for illicit tips. Rengan called the consultant “a little dirty” and boasted that he “finally spilled his beans” by sharing corporate secrets.

A middle brother, Ragakanthan, who goes by R. K., also worked for Galleon. He has not been charged with any wrongdoing.

Qatalyst Hires Morgan Stanley Banker

Qatalyst Group, the West Coast boutique advisory firm led by Frank Quattrone, has hired Marcie Vu as a partner.

Ms. Vu was most recently head of consumer Internet investment banking at Morgan Stanley. She was part of the team that helped take Facebook and LinkedIn public. She also advised AdMob on its $750 million acquisition by Google and Cnet on its sale to CBS for $18 billion in 2008.

“Marcie’s deep industry knowledge, vast network of relationships and extensive transaction experience with established and emerging internet leaders will add significantly to our strong consumer technology practice led by my co-founder Jonathan Turner,” Mr. Quattrone said in a statement.

Over the last 12 months, Qatalyst ranks 12th among firms advising on technology transactions in the United States, according to Thomson Reuters data, with eight deals worth more than $8 billion.

Ms. Vu, 40, will be based at Qatalyst’s San Francisco headquarters. She joined Morgan Stanley in 2002.

A 2010 profile in Investment Dealers’ Digest, described how she and her family fled from Vietnam during the fall of Saigon in 1975. Her father was head of military intelligence for the South Vietnamese government, according to the article.

Bankia Stock Value Is Nearly Wiped Out Under Recapitalization Plan

MADRID â€" Shares in Bankia, the giant Spanish mortgage lender whose collapse last year led to a banking crisis in Spain, slumped Monday in the first day of trading after regulators wiped out most of the stock’s value.

The shares closed at 14.7 euro cents, down 41 percent from the close on Friday.

Regulators said Friday that Bankia shares would be revalued at 1 cent each, as the custodial managers who now oversee the bank try to create a clean slate. The new valuation was a condition of Bankia’s getting an initial capital injection of 10.7 billion euros ($13.9 billion), from European rescue funds.

The action is the latest blow to the tens of thousands of the bank’s consumer clients who bought into the initial public offering two years ago, when Bankia was valued at 3.75 euros a share.

Standard & Poor’s lowered Bankia’s rating by one notch, to BB-, which is three rungs below investment grade. The ratings agency said the bank was likely to remain dependent on funding from the European Central Bank for the time being. It also said the cut was justified because the positive impact of Bankia’s plans to increase its capital by converting 6.5 billion euros of hybrid debt into equity ‘‘will not be as great as we previously expected.’’

In February, Bankia reported a loss of 19.2 billion euros for last year, a record for the Spanish banking industry. But it forecast a swift return to profit following the bailout and the cleaning up of its balance sheet.

Dell Founder Said to Weigh Switching to Blackstone Offer

With the emergence of the Blackstone Group as a suitor for Dell Inc., it appears that Michael S. Dell may have a change of heart.

Mr. Dell considers Blackstone’s preliminary proposal to be potentially friendly to management and may reach out to the private equity firm later this week, a person briefed on the matter said on Monday.

Were he to switch, that would mean backing out of his $24.4 billion proposal to take control of the company, made in partnership with the private equity firm Silver Lake.

Mr. Dell has already committed to exploring “in good faith the possibility of working with third parties regarding alternative acquisition proposals,” according to a press release that a special committee of Dell’s board put out on Monday.

In many ways, Mr. Dell’s decision makes sense. Because of his roughly 16 percent stake in the company, he would be an important part of any transaction. He has also agreed to contribute about $750 million cash to the Silver Lake transaction.

That huge stake also means that he stands to benefit from a higher bid for the company.

Moreover, Blackstone’s proposal so far doesn’t describe what management will look like should it succeed. But the buyout firm has been talking to potential replacements for the chief executive role should Mr. Dell step down or be kicked out.

Representatives for Mr. Dell, Silver Lake and Blackstone declined to comment or weren’t immediately available for comment.

Cyprus Rescue Deal Establishes Addresses Important Principles

Cyprus’s economy is going to suffer terribly in the next few years. Some of that is inevitable given how bloated its banking system had become. But the disastrous handling of the crisis, especially in the past week, will make things much worse.

That said, the bailout deal that Cyprus reached with its euro zone partners in the early hours of Monday morning makes the best of an extremely bad job - both for the small Mediterranean island and its rescuers.

It establishes three important principles. First, there will be no losses for insured deposits. Last week’s aborted deal foolishly involved taxing them at 6.75 percent. Second, uninsured creditors rather than taxpayers will pay the entire cost of bailing out Cyprus’s two troubled banks - Cyprus Popular Bank, or C.P.B., and Bank of Cyprus, or B.O.C. Third, Cyprus’s oversized banking sector, which depended heavily on somewhat dubious Russian cash, will be slimmed down.

There are two lingering doubts. Will capital controls be imposed And is Cyprus’s debt sustainable given the economy will be clobbered

The key to the deal was to impose the entire pain of bank restructuring on the lenders’ uninsured creditors. Cyprus Popular Bank will be “resolved” - a euphemism for being put into controlled bankruptcy. Its good assets and insured deposits will be merged with the Bank of Cyprus. But its 4.2 billion euros of uninsured deposits will be kept in the remaining bad bank and converted into equity. They could lose most of their money.

The Bank of Cyprus is being treated slightly less harshly. It will continue as a going concern and will be recapitalized so that it enjoys a capital ratio of 9 percent. The money to do this will come from converting a portion of its uninsured deposits into equity.

Until the number crunching is finished, these deposits - which amount to perhaps 10 billion euros - will be frozen. It’s unclear what the eventual losses will be but the Cypriot government says they could be about 30 percent.

Meanwhile, shareholders and bondholders in both banks are going to be virtually wiped out. There are only about 1.4 billion euros of these.

The deal will be extremely painful for the unsecured creditors of these two banks. But they are the ones who ought to suffer the most pain. There is also a silver lining in that many of these will be precisely those Russians who poured money into Cyprus, cutting somewhat the impact on the domestic economy. That said, there’s no denying that local businesses and others will be savaged too - tipping some into bankruptcy and stifling activity.

The flip side of the decision to inflict all the cost on creditors is that taxpayers don’t have to pay a single euro to bail out the two big banks. So Cyprus may not suffer a repeat of the Irish problem - where a decision to bail out its oversized banks dragged down the government too.

But Cyprus will still have big problems. Its offshore banking center, a huge source of income and employment, has been destroyed. Confidence has been whacked, and businesses will find it hard to get credit.

All the old economic forecasts are up in the air. Exotix, the brokerage firm, is now predicting a 10 percent slump in gross domestic product this year followed by 8 percent next year and a total 23 percent decline before nadir is reached.

Using Okun’s law - which translates every one percentage fall in G.D.P. to half a percentage point increase in unemployment - such a depression would push the unemployment rate up 11.5 percentage points, taking it to about 26 percent.

Nicosia is getting 10 billion euros, about 60 percent of G.D.P., from its rescuers to help it over this difficult period. Some will be used to finance a fiscal deficit, which will be worse as a result of the coming slump. The rest will be used to roll over maturing debt and bail out some smaller banks.

The International Monetary Fund thinks Cyprus’s debt will still hit 100 percent of G.D.P. in 2020, despite the worsening economic outlook. It says the original program had some wiggle room. But it’s not clear how the I.M.F. has done its numbers. If they don’t add up, investors will worry that today’s bailout is just the precursor to another one in six to 12 months. The fear of that will then further hurt economic spirits.

The more immediate worry is that Nicosia could impose capital controls when the banks reopen. So far no decision seems to have been taken, beyond the plan to convert C.P.B.’s uninsured deposits into equity and freeze B.O.C.’s uninsured deposits.

There will be a temptation to take more extensive action in order to prevent a run on all the remaining deposits. But this would be a mistake. Not only would it further gum up the Cypriot economy. It would send a bad signal to depositors in other vulnerable euro zone countries such as Spain, Italy and Greece.

The European Central Bank has said it will provide B.O.C. with liquidity “in line with its applicable rules”. It should make clear this means it is prepared to fund a run on deposits and doesn’t want capital controls beyond freezing B.O.C.’s uninsured deposits. The mere act of doing so will settle nerves.

The decision to exempt insured depositors from a tax has stopped one channel of potential contagion from Cyprus. The euro zone must now remove any risk of a second possible channel: capital controls.

Hugo Dixon is co-founder of Breakingviews and editor-at-large at Reuters News. For more independent commentary and analysis, visit breakingviews.com.

Sending a Message for Backpedaling on Settlements

When a company accepts a deferred prosecution agreement to resolve a criminal investigation, one requirement is that it cannot backtrack on an admission of guilt. Standard Chartered learned the hard way that prosecutors take these agreements quite seriously when an executive tries to soft-pedal any corporate wrongdoing.

Earlier this year, John Peace, the chairman of Standard Chartered’s board, spoke at a news conference announcing the bank’s quarterly earnings. He was asked whether any employees would be held responsible for violations of United States laws restricting financial dealings with Iran and other countries that led to settlements with federal and state authorities costing the bank about $667 million. He responded, “We had no willful act to avoid sanctions; you know, mistakes are made â€" clerical errors â€" and we talked about last year a number of transactions which clearly were clerical errors or mistakes that were made.”

There is just one big problem with attributing violations to mere “clerical errors.” The deferred prosecution agreement with the Justice Department specifically provides that no one at Standard Chartered can make “any public statement contradicting the acceptance of responsibility” in the settlement. And the statement of facts accompanying the agreement says that the bank “knowingly and willfully engaged in this criminal conduct,” something far beyond mere mistakes.

To make matters worse, the agreement provides that a public statement like Mr. Peace’s is a “willful and material breach” of the agreement, which permits the Justice Department to reinstate the charges and pursue a criminal prosecution. If that were to happen, the bank’s admission of wrongdoing could be used in a trial, which means it would have little defense to the charges.

It has not yet happened that a company entering into a deferred prosecution agreement has been found to have breached it, although a couple have come close.

Bristol-Myers Squibb settled charges over accounting fraud based on “channel stuffing” in 2005, but during the term of its agreement the government began investigating it for possible antitrust violations. Such agreements always prohibit a company from engaging in criminal conduct during its term, so Bristol-Myers faced the prospect of a renewed prosecution. The Justice Department instead permitted the company to plead guilty to making a false statement and pay the maximum fine of $1 million fine in a separate case without finding a violation of the agreement.

Another company, Wright Medical Technology, was investigated for improper payments to doctors shortly after it entered into a deferred prosecution agreement involving similar conduct. Rather than find a breach, prosecutors agreed to extend the term of the agreement for another year.

It was unlikely Mr. Peace’s comments would have triggered a full-scale prosecution. But that does not mean prosecutors were willing to allow this to pass quietly, either.

The deferred prosecution agreement permits Standard Chartered to “cure” any violation before there is a finding of a breach. Thus, Mr. Peace issued a retraction two weeks later, stating that his comments were “both legally and factually incorrect” and that Standard Chartered accepts responsibility “for past knowing and willful criminal conduct in violating U.S. economic sanctions laws and regulations.”

That was not enough for the government, however, because it went a step further to send a public message about how displeased it was. As reported in The Financial Times, the United States government required Mr. Peace, along with Standard Chartered’s chief executive, Peter Sands, and finance director, Richard Meddings, to come to a meeting in Washington with senior Justice Department officials and the Manhattan district attorney, Cyrus R. Vance Jr., whose office participated in the settlement. One can almost imagine the three executives waiting for the meeting to start like miscreant schoolboys sitting outside the principal’s office, shuffling their feet before an expected tongue-lashing.

The Justice Department’s goal was not just to humiliate Standard Chartered, although it probably succeeded in doing so. More important is that the warning this meeting sent to other companies that want to accept settlements in which criminal charges are waived.

Deferred prosecution agreements have become a standard means for resolving a wide range of cases involving corporate misconduct. Even in recent resolutions with global banks over manipulation of the London interbank offered rate, or Libor, in which there were guilty pleas, the parent company has entered into such an agreement while only a foreign subsidiary actually admits to the criminal charges, so the consequences are minimized.

The Justice Department has taken a fair amount of criticism for using these agreements, but they are unlikely to disappear. Eric H. Holder Jr., the attorney general, recently acknowledged that there were some institutions that had become so large that a criminal prosecution of the organization might be impossible because of the risks it would present to the financial system.

So prosecutors could hardly allow a comment like Mr. Peace’s to pass with a simple retraction and apology. Otherwise, deferred prosecution agreements would be even less of a deterrent to future misconduct.

Instead, the message to executives at other companies â€" most important, the banks caught up in criminal investigations â€" is that they will pay a public price if their executives try to backtrack on an admission of guilt. Shaming appears to be one of the tools the government is willing to use against executives to give credence to deferred prosecution agreements.

Sending a Message for Backpedaling on Settlements

When a company accepts a deferred prosecution agreement to resolve a criminal investigation, one requirement is that it cannot backtrack on an admission of guilt. Standard Chartered learned the hard way that prosecutors take these agreements quite seriously when an executive tries to soft-pedal any corporate wrongdoing.

Earlier this year, John Peace, the chairman of Standard Chartered’s board, spoke at a news conference announcing the bank’s quarterly earnings. He was asked whether any employees would be held responsible for violations of United States laws restricting financial dealings with Iran and other countries that led to settlements with federal and state authorities costing the bank about $667 million. He responded, “We had no willful act to avoid sanctions; you know, mistakes are made â€" clerical errors â€" and we talked about last year a number of transactions which clearly were clerical errors or mistakes that were made.”

There is just one big problem with attributing violations to mere “clerical errors.” The deferred prosecution agreement with the Justice Department specifically provides that no one at Standard Chartered can make “any public statement contradicting the acceptance of responsibility” in the settlement. And the statement of facts accompanying the agreement says that the bank “knowingly and willfully engaged in this criminal conduct,” something far beyond mere mistakes.

To make matters worse, the agreement provides that a public statement like Mr. Peace’s is a “willful and material breach” of the agreement, which permits the Justice Department to reinstate the charges and pursue a criminal prosecution. If that were to happen, the bank’s admission of wrongdoing could be used in a trial, which means it would have little defense to the charges.

It has not yet happened that a company entering into a deferred prosecution agreement has been found to have breached it, although a couple have come close.

Bristol-Myers Squibb settled charges over accounting fraud based on “channel stuffing” in 2005, but during the term of its agreement the government began investigating it for possible antitrust violations. Such agreements always prohibit a company from engaging in criminal conduct during its term, so Bristol-Myers faced the prospect of a renewed prosecution. The Justice Department instead permitted the company to plead guilty to making a false statement and pay the maximum fine of $1 million fine in a separate case without finding a violation of the agreement.

Another company, Wright Medical Technology, was investigated for improper payments to doctors shortly after it entered into a deferred prosecution agreement involving similar conduct. Rather than find a breach, prosecutors agreed to extend the term of the agreement for another year.

It was unlikely Mr. Peace’s comments would have triggered a full-scale prosecution. But that does not mean prosecutors were willing to allow this to pass quietly, either.

The deferred prosecution agreement permits Standard Chartered to “cure” any violation before there is a finding of a breach. Thus, Mr. Peace issued a retraction two weeks later, stating that his comments were “both legally and factually incorrect” and that Standard Chartered accepts responsibility “for past knowing and willful criminal conduct in violating U.S. economic sanctions laws and regulations.”

That was not enough for the government, however, because it went a step further to send a public message about how displeased it was. As reported in The Financial Times, the United States government required Mr. Peace, along with Standard Chartered’s chief executive, Peter Sands, and finance director, Richard Meddings, to come to a meeting in Washington with senior Justice Department officials and the Manhattan district attorney, Cyrus R. Vance Jr., whose office participated in the settlement. One can almost imagine the three executives waiting for the meeting to start like miscreant schoolboys sitting outside the principal’s office, shuffling their feet before an expected tongue-lashing.

The Justice Department’s goal was not just to humiliate Standard Chartered, although it probably succeeded in doing so. More important is that the warning this meeting sent to other companies that want to accept settlements in which criminal charges are waived.

Deferred prosecution agreements have become a standard means for resolving a wide range of cases involving corporate misconduct. Even in recent resolutions with global banks over manipulation of the London interbank offered rate, or Libor, in which there were guilty pleas, the parent company has entered into such an agreement while only a foreign subsidiary actually admits to the criminal charges, so the consequences are minimized.

The Justice Department has taken a fair amount of criticism for using these agreements, but they are unlikely to disappear. Eric H. Holder Jr., the attorney general, recently acknowledged that there were some institutions that had become so large that a criminal prosecution of the organization might be impossible because of the risks it would present to the financial system.

So prosecutors could hardly allow a comment like Mr. Peace’s to pass with a simple retraction and apology. Otherwise, deferred prosecution agreements would be even less of a deterrent to future misconduct.

Instead, the message to executives at other companies â€" most important, the banks caught up in criminal investigations â€" is that they will pay a public price if their executives try to backtrack on an admission of guilt. Shaming appears to be one of the tools the government is willing to use against executives to give credence to deferred prosecution agreements.

Rival Bids for Dell

 |  RIVAL BIDS FOR DELL The bidding war for Dell is heating up. The computer maker confirmed on Monday that it has received preliminary takeover proposals by the private equity giant Blackstone Group and the investor Carl C. Icahn. As expected, the special committee determined that “both proposals could reasonably be expected to result in superior proposals” and intends to keep negotiating with Blackstone and Mr. Icahn, DealBook’s Michael J. de la Merced reports.

Both proposals are in very preliminary stages: neither has firm financing in place, instead relying on assurances from banks that both parties can raise the money. But the renewed competition for Dell is the latest challenge for Michael S. Dell and his private equity partner, Silver Lake, after some analysts and investors believed that his offer was too low.

Even if Blackstone or Mr. Icahn submits a final offer to the special committee’s liking, Mr. Dell still has the right to match that bid one time, giving him a way to guide the bidding, according to DealBook’s Deal Professor, Steven M. Davidoff. “It still may be that the Silver Lake group raises its bid a few dollars a share just to lock up this contest,” Mr. Davidoff writes.

CYPRUS SECURES BAILOUT DEAL After last-minute negotiations to avoid a collapse of Cyprus’ banking system, European politicians agreed early on Monday morning on a bailout package to keep the small country in the euro zone. The deal will drastically cut the size of Cyprus’ debt-laden banking sector, and force losses on depositors and bondholders of the country’s largest lender, according to The New York Times.

As part of the agreement, the small European country will also receive a bailout package worth $13 billion in early May. Laiki Bank, one of the country’s largest financial institutions, will be wound down, and depositors in the firm with accounts holding more than $130,000 will be subject to a heavy penalties, which have yet to be determined. Bank of Cyprus - the country’s largest bank - will take on some of Laiki’s liabilities, though depositors are not likely to face a similar tax on their accounts.

The dysfunctional way that European policymakers have tackled the crisis in Cyprus offers lessons for the rest of the Continent, according to Financial Times’ Gavyn Davis. The failure to quickly resolve the country’s financial problems shows that a banking union across the euro zone remains a distant reality.

ON THE AGENDA: Dick Costolo, chief executive of Twitter, is on Bloomberg TV at 1:00 p.m. New York Federal Reserve President William Dudley will give a speech at the Economic Club of New York at 12:30 p.m. Federal Reserve chairman Ben Bernanke will discuss what lessons can be taken from the financial crisis with outgoing Bank of England governor Mervyn King and Larry Summers at the London School of Economics at 1:15 p.m.

BANKS LOSE A LOOPHOLE Banking regulators plan to limit banks’ use of derivatives to lessen the amount of capital they need to hold. Banks like Citigroup had been buying credit default swaps on loans, letting them keep the assets while cutting their loss reserves by as much as 96 percent, Bloomberg News reports.
“The proposed changes are intended to ensure that the costs, and not just the benefits of purchased credit protection are appropriately recognized in regulatory capital,” the Basel Committee on Banking Supervision said.

Mergers & Acquisitions »

F.C.C. Shift May Thwart a Murdoch Media Deal  |  In weighing a bid for The Los Angeles Times, Rupert Murdoch may be forced wait even longer after Julius Genachowski, the chairman of the Federal Communications Commission, resigned last week.
NEW YORK TIMES

Schroders to Buy Cazenove Capital  |  The British fund manager Schroders agreed on Monday to buy local rival Cazenove Capital for $646 million.
BLOOMBERG

Rhone Capital to Buy Bakery Unit from CSM  |  The Dutch company CSM has agreed to sell its bakery division to the private equity firm Rhone Capital for $1.4 billion.
BLOOMBERG

Buyers Circle M&S as Takeover Target  |  As the British retailer struggles from weak clothing sales, a number of potential bidders, including a Qatari sovereign wealth fund, continue to eye Marks & Spencer as a potential takeover target.
FINANCIAL TIMES

Sinopec Buys Energy Assets  |  The China Petroleum and Chemical Corp, or Sinopec, has agreed to pay $1.5 billion for oil and gas-producing assets held by its parent company.
REUTERS

Buyer Found for Blockbuster’s UK Unit  |  The restructuring firm Gordon Brothers Europe has bought Blockbuster’s British division, which had recently filed for bankruptcy, for an undisclosed fee.
REUTERS

INVESTMENT BANKING »

Investors Face Losses Over Spanish Banks  |  The Spanish government is set to inflict heavy losses on investors at the country’s nationalized banks, as politicians hire advisers to sell down assets.
WALL STREET JOURNAL

Former Deutsche Banker Joins Arabtec Holding  |  The Dubai real-estate developer has appointed former Deutsche Bank executive Shohidul Ahad-Choudhury as head of mergers and acquisitions.
BLOOMBERG

PRIVATE EQUITY »

Rubenstein Defends Private Equity  |  David M. Rubenstein, co-founder of the Carlyle Group, said private equity firms are not about high compensation plans for managers, but a way to make businesses more efficient.
FINANCIAL TIMES

HEDGE FUNDS »

Hedge Funds Profit From Japan’s Economy  |  As Japan’s stock market has enjoyed a good start to the year, hedge funds investing in the country’s equities have returned 11.3 percent from December through February, the best three-month result on record.
BLOOMBERG

I.P.O./OFFERINGS »

Bausch & Lomb Plans I.P.O.  |  Bausch & Lomb, the eye-care company, said in an I.P.O. registration filing that Warburg Pincus would continue to own a majority of the stock after the offering.
DealBook »

Jaguar Land Rover Denies Fundraising Plans  |  Jaguar Land Rover has denied rumors that it plans to raise $1 billion from Chinese investors later this year.
FOX BUSINESS

Marin Stock Jumps in Trading  |  Marin Software jumped 16 percent in its market debut on Friday, ending the day at $16.26. The advertising technology company had priced its initial public offering at $14.
WALL STREET JOURNAL

VENTURE CAPITAL »

Hope for Palestinian Start-Ups  |  The small but growing Palestinian tech scene now includes a start-up incubator and a burgeoning outsourcing industry.
TECHCRUNCH

LEGAL/REGULATORY »

S.E.C. Charges Belesis of John Thomas Financial with Fraud  |  The Securities and Exchange Commission has charged Anastasios Belesis, founder of the independent broker John Thomas Financial, and a hedge fund manager with defrauding investors.
BLOOMBERG

Exchanges Lobby Against Regulatory Burden  |  Faced with increased scrutiny from U.S. and European authorities, exchanges are turning to lobbyists to dampen down the proposed rules.
WALL STREET JOURNAL

Yahoo Buys Mobile App

Yahoo has bought Summly, the mobile news reader app founded by a young British entrepreneur.

In a statement, the London-based company said it had bought the small outfit, which will close its app. The price was not disclosed â€" I will try to find out soon enough. But the company had been seeking additional funding recently at a huge valuation, in stark contrast to its small size (and nascent business model).

Previously, ATD reported in December that Yahoo was looking at the startup. As we noted then, Yahoo was looking at trendy mobile “acqhires” to give the sleepy Silicon Valley Internet giant some sizzle and improve its moribund mobile offerings.

Yahoo CEO Marissa Mayer has been buying up a range of small mobile startups, largely for their teams of talented and innovative engineers.

Said Yahoo: “Founder Nick D’Aloisio and the Summly team are joining Yahoo! in the coming weeks. While the Summly app will close, we will acquire the technology and you’ll see it come to life throughout Yahoo!’s mobile experiences soon. We’re not disclosing purchase price or other terms of the deal.”

News readers have been getting snapped up of late. CNN acquired Zite for $20 million in 2011, while we reported that LinkedIn was in the midst of buying Pulse for upwards of $50 million.

The 17-year-old D’Aloisio created the high-profile news reading app, which garnered much attention in the last year in the mobile space, which is probably what attracted Yahoo to it.

As I wrote:

To get an idea of the adorable hip factor involved, here’s a really clever video D’Aloisio did with actor Stephen Fry, who is also an investor in the startup:

Summly Launch from Summly on Vimeo.

Buyout Effort Ended, Best Buy Founder Returns to Company

Richard Schulze, who explored and then abandoned a possible buyout bid for Best Buy, is returning to the electronics chain he founded.

Best Buy said on Monday that Mr. Schulze would become chairman emeritus. And two former Best Buy executives whom Mr. Schulze had tapped to be involved in a potential buyout, Brad Anderson and Al Lenzmeier, have been nominated to board seats under an agreement between the company and its founder

Mr. Schulze had resigned from the board last June and began to work with bankers from Credit Suisse to weigh a bid to take the struggling chain private. But that effort petered out this year and no buyout bid materialized. In February, Mr. Schulze and his three private equity partners â€" Cerberus Capital Management, Leonard Green & Partners and TPG Capital â€" were instead in talks to add to Mr. Schulze’s 21 percent stake in the company.

Now, Mr. Schulze has chosen to support the company’s chief executive, Hubert Joly, in his effort to turn the retailer around.

“Over the past several months, I have come to know and respect Hubert, and have a high regard for the work he and his executive team are doing to revitalize Best Buy for the benefit of all stakeholders,” Mr. Schulze said in a statement. “My dedication to the company that I founded and love is unwavering and, together with Hubert and the board, I determined that the best way to support Best Buy would be to return in support of the initiatives under way.”

Dell Board to Negotiate With Blackstone and Icahn

The bidding war over Dell is heating up

On Monday, the special board committee said the two alternative preliminary plans recently submitted by the private equity firm Blackstone and the activist investor Carl Icahn could result in “superior proposals,” to the the current offer on the table by the company founder Michael Dell and Silver Lake Partners. As a result, the committee, which is overseeing the sale process, will continue negotiations with the two rival bidders.

“We are gratified by the success of our go-shop process that has yielded two alternative proposals with the potential to create additional value for Dell shareholders. We intend to work diligently with all three potential acquirers to ensure the best possible outcome for Dell shareholders, whichever transaction that may be,” Alex Mandl, the chairman of the special committee, said in a statement.

Apple Buys GPS Start-Up

By JESSICA E. LESSIN

Apple Inc. has acquired the indoor-GPS company WifiSLAM, a sign that a war over indoor mobile-location services is heating up.

Apple paid around $20 million for the Silicon Valley-based startup, according to a person familiar with the matter who said the deal closed recently.

The acquisition could help Apple catch up with rival Google Inc. in mapping after it cut its ties with the Internet giant over maps last year. Google offers indoor mobile maps of locations like shopping malls and airports for Android users but not for iPhone users. The service is based in part on floor plans.

WifiSLAM, which is roughly two years old, is among a slew of technology companies trying to crack the problem of how to detect a mobile-phone user's location when the user is indoors and traditional GPS technology doesn't work.

Its approach involves detecting a phone user's location in a building using Wi-Fi signals that already exist inside the building. WifiSLAM has been offering the technology to application developers for indoor mapping and new types of retail and social-networking apps.

Indoor mapping and tracking has long been seen as an important, potentially lucrative frontier for technology companies. Analysts and proponents of the technology say it could be used to build apps that direct users to their gate at the airport, provide audio tours in museums or push offers to consumers based on where they are standing inside a store.

But indoor mapping hasn't taken off because of technology limitations, including poor Wi-Fi penetration inside buildings. And the business models around indoor location services remain nascent.

An Apple spokesman confirmed the deal, saying the company "buys smaller technology companies from time to time" and generally doesn't discuss its plans. He declined to comment further. WifiSLAM representatives didn't respond to a request for comment.

Opus Research analyst Greg Sterling said that consumer apps in the space have struggled to build audiences that are big enough to interest advertisers.

But he believes that data about consumers' indoor whereaboutsâ€"with names omitted to address privacy concernsâ€"could be extraordinarily valuable for retailers studying foot traffic and making merchandising decisions. "There is a lot of money lurking in in-store merchandising," he says.

He and others predict that new advertising models could emerge, such as charging a marketer only when an ad drives an in-store purchase, something retailers have been experimenting with and lusting after for a long time.

For Apple, one likely lure of the technology is to help it keep up with other mapping products as the company and its rivals strive to one-up each other on features.

Apple released its own iPhone mapping service last year after using Google mapping data since the phone's inception. But Apple's offering got poor reviews amid user complaints about inaccurate data. Apple Chief Executive Tim Cook apologized for the product's quality, and Apple has been working to improve it.

Others are also interested in the market. Microsoft Corp., for example, offers some indoor maps.

Last year, an alliance of technology companies including Samsung Electronics Co., Nokia Corp. and Qualcomm Inc. announced plans to invest in indoor location services using Bluetooth and Wi-Fi signals. The alliance said the companies would introduce new indoor location services this year.

WifiSLAM has a handful of employees, and its co-founders include former Google software engineering intern Joseph Huang.

The company has raised money from a handful of angel investors, including Google employee Don Dodge, according to the investor site AngelList.

Write to Jessica E. Lessin at jessica.lessin@wsj.com

A version of this article appeared March 25, 2013, on page B1 in the U.S. edition of The Wall Street Journal, with the headline: Apple Buys Indoor GPS Specialist In Map War.