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Michael Dell and Carl Icahn Showdown Not About Checkbooks

Tickers in this article: AAPL DELL HPQ MSI XRX

Updated from 10:07 a.m. ET to include Dell disclosure and Friday media reports.

NEW YORK (TheStreet) -- Michael Dell and Carl Icahn are both putting up billions of their own cash to win control of struggling PC-maker Dell and conventional wisdom indicates the final leg of the takeover horse race will center on both billionaire's checkbooks.

Still, as Icahn and Dell fight a dollars and cents battle to win over Dell shareholders, the conclusion of the buyout drama may be more of referendum on how minds on Wall Street and in corporate America have become too focused on short-term financial engineering.

Icahn believes Dell contains far more value if it squeezes cash out of a declining PC business and continues to invest in a software and IT services turnaround strategy. The Michael Dell and Silver Lake consortium, meanwhile, can succeed in a buyout even if Dell's revenue and profits fall under their ownership.

Icahn is an expert at running down underperforming businesses for their cash flow, spinning off valuable assets and finding buyers for operations that were given little value in public markets.

For instance, Icahn's multi-year effort to split and sell the assets of Motorola stands out as a rare tech hardware turnaround, amid consumers' adoption of high end smartphones like the Apple iPhone. Icahn split Motorola's IT services division, Motorola Solutions , from its handset business Motorola Mobility, which was eventually sold to Google .

Dell's fast-declining PC unit and its burgeoning services businesses provide a remarkably similar turnaround canvas for a breakup artist like Icahn.

Private equity buyers such as the Michael Dell and Silver Lake consortium, meanwhile, don't necessarily have to achieve revenue or profitability growth to see returns many multiples in excess of their takeovers.

Consider that the Michael Dell and Silver Lake consortium is offering up only about $6 billion in actual equity to own Dell. An eventual IPO of Dell at just two thirds of its current takeover price would be a big win for the consortium of investors. It is no surprise the consortium has spent recent months pointing out to current investors just how bad Dell's businesses are performing.

It has been five months since Michael Dell and private equity giant Silver Lake Partners unveiled a $13.65 a share takeover that values Dell at about $24.4 billion. While Michael Dell and Silver Lake have yet to budge from their initial offer, Icahn has kept the buyout in the news with multiple alternative takeover proposals and an assembly of his own shareholder consortium.

Some media reports indicate that Icahn's newest proposal, a $14 a share tender offer and a deal struck with Southeastern Asset Management may prompt the Michael Dell and Silver Lake consortium to finally increase their bids, even though they continue to enjoy full support from Dell's board.

Dell said in a Friday filing, it continues to see Icahn's tender as containing unrealistic financial assumptions. Bloomberg, meanwhile, reports the Michael Dell and Silver Lake consortium have no plans to boost their takeover offer, contradicting some recent speculation of a price increase.

An upcoming July 18 shareholder vote on Michael Dell and Silver Lake's offer provides the key drama for any price increase. Although most twists in the near half year takeover battle have swung in the consortium's direction, Icahn has built a powerful base of dissenting voters.

Investors and analysts continue to speculate on the price the Michael Dell and Silver Lake group can turn Icahn supporters to their side?

For some, it appears a game of dollars and cents. Donald Yacktman of Dell shareholder Yacktman Asset Management was quoted by Bloomberg as saying $15 a share would do the trick. That would equate to about a $2.3 billion boost to Michael Dell and Silver Lake's $24.4 billion offer and would be among the biggest private equity buyouts of all-time. The amount is also within the realm of Michael Dell's checkbook.