Dell goes private for $24 billion

Dell goes private for $24 billion

Summary: The world's number three computer maker by shipments is pulling out of the stock market in a $24 billion deal, led by the company's founder.

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TOPICS: Dell
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Computing giant Dell has ended weeks of speculation and numerous rumors by announcing the company's move to go private, after more than two decades on the stock market.

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Founder and chief executive Michael Dell and investment firm Silver Lake offered $24.4 billion, or $13.65 per share. The price is a 25 percent premium on Dell's closing share price of $10.88 on January 11, just before the rumors of the buy-out began.

While Michael Dell will become the sole individual majority owner of the company he founded by holding a 14 percent take in the deal, others will become minority investors. He will remain the company's chief executive officer.

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Dell going private, a good thing for all

Dell going private, a good thing for all

The much rumored privatization of Dell could be a good thing for everyone. Here's why.

Dell's board met last night to vote on the deal. The vote unanimously fell in favor of Dell going private.

However, the deal still has to pass the regulators. The transaction is expected to close by Dell's fiscal second quarter later this year.

It is understood that the deal is the largest buyout since the global financial crisis (or "credit crunch"), which hit financial markets worldwide for two years beginning late 2007.

It comes after weeks of rumors that the world's number three PC maker by shipments was planning a move to go private, releasing the company from the burdens of having to report its finances every quarter and each fiscal year, and report to shareholders. 

Microsoft, which provides its Windows operating systems for Dell machines, provided a $2 billion loan to the deal. Exactly how that's going to play out in the long run will be interesting, considering Dell offers Linux-based software on both its desktop PCs and on its range of servers. ZDNet's Larry Dignan has more on this.

"Microsoft is committed to the long term success of the entire PC ecosystem and invests heavily in a variety of ways to build that ecosystem for the future," the software giant said in a statement released earlier today.

Dell was also given debt financing by Bank of America Merrill Lynch, Barclays, Credit Suisse, and RBC Capital Markets.

Related: Will Microsoft's $2 billion stake in Dell play out like its Nokia partnership?Microsoft's a player in Dell private equity play: Here's why Dell going private, a good thing for all | Microsoft statement | Dell statement | Techmeme

In prepared remarks, company founder Michael Dell said:

I believe this transaction will open an exciting new chapter for Dell, our customers and team members. We can deliver immediate value to stockholders, while we continue the execution of our long-term strategy and focus on delivering best-in-class solutions to our customers as a private enterprise.

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.

I am committed to this journey and I have put a substantial amount of my own capital at risk together with Silver Lake, a world-class investor with an outstanding reputation. We are committed to delivering an unmatched customer experience and excited to pursue the path ahead.

Here are the numbers you need to know:

  • Dell stockholders will receive $13.65 per share in cash;
  • Overall transaction is valued at approximately $24.4 billion;
  • Michael Dell owns 14 percent of Dell's common shares, making him the largest sole stakeholder in the now-private company;
  • 25 percent premium on Dell's share price since the rumor mill began to churn;
  • 35 percent premium of Dell's enterprise value since the going-private rumors began;
  • Dell has been on the stock market for 24 years;
  • According to IDC figures, Dell remains the third largest PC maker worldwide by shipments after HP and Lenovo.

In 2012, the company shipped 38.7 million PCs, but its share declined by more than 12 percent year-over-year, losing out to rival PC makers and post-PC device manufacturers. 

The firm already has a number of key acquisitions under its belt, notably software services giant Quest, as it attempts to transition away from hardware into a services business, but has yet to make its mark on the long-term revenue grabber—the business and enterprise market.

Going forward, Dell now has to focus on reinvigorating life back into its corporate technology and enterprise business focus. A continued decline in the PC market could spell continued trouble for the PC maker as it struggles to realign itself to an ever-burgeoning post-PC market of tablets, smartphones, and cloud-based technologies.

Topic: Dell

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42 comments
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  • So I guess he did give the money back to the shareholders

    Smart move by Dell. I think this is going to pay off for them.
    William Farrel
  • Dell Circling the Drain....

    Make Junk and people will realize it. Dell has made Junk since they started....

    However, how many private companies with shrinking marketshare in their core business, no real "brand equity" and increased debt stick around long term? Hint: not many.

    Dell is circling the drain and I predict will be gone in less than 10 years.
    itguy10
    • Not junk

      I used to be a Gateway user but switched over when Gateway stopped selling online. I must say that so far, I've been pleased overall with Dell. Hope they stick around for a while...
      TechieJohn2
    • Since they are the number 3 PC maker in the world

      I guess people realize they aren't building junk.

      You have some personal beef with Dell, that's fine, just don't pretend it has something to do with the quality of their hardware. we get good pricing and great life out of Dell equipment, so I can't see what you're basing you "assesment" from.

      Circling the drain? Obviously you don't know business.
      William Farrel
      • they aren't building junk ...

        ... neither are they innovating.

        It's a fast changing world, abd Dell are pretending that nothing has changed. They are locked into a windows desktop mentaility that - like it or not - is shrinking fast.

        They are third biggest in a shrinking market, with no plan B.
        Heenan73
        • Not innovating? Tell that to my latest four purchases

          Several things make Dell machines uniquely desirable to buy:

          1. EASE OF CHANGING PARTS. Even a brainout can do it.
          2. CLEAR INSTRUCTIONS ON HOW TO CHANGE THE PARTS. Even a brainout can read it.
          3. GOOD PRICES ON GOOD PARTS. I just bought two Scorpio Blue drives for my Latitude 6510, each for only $65 for 500 GB.
          4. INNOVATIVE DESIGN AND FEATURES.

          Now look at this: I can clone my internal hard drive, then swap it out and put a Scorpio in, then clone back to the Scorpio after partitioning it. Oila! I have a brand new computer. Now I can experiment with Win8, no worries. If I hate it as I already know I will, the ORIGINAL DRIVE is unaffected. Because, you only need to slide it out. Dell thought of everything, there.

          Great, if you want to switch drives and try a Linux distro. Or, if you have sensitive data.

          Additionally, in the second laptop drive bay -- and this is a trademark Dell feature, what decided me on buying THEIR laptops versus anyone else's -- the second drive bay can sport an optical drive (including Blu-Ray), or that bay can accommodate a second hard drive, or it can accommodate an extra 12-cell BATTERY. That, in addition to 9-cell batteries. Real easy to swap out, even hot swap.

          And the RAM is a cinch to change. Easy to know what you need, easy to find on the website.

          Added to that, you've got Latitude On, so you can hook up to your company's network, a variety of WiFi options with cards you just slide in, SD cards, smart Powered 3.0 USB hub. So I don't have to worry about lack of juice for my WD Passport 3.0 drive. Will power a smartphone. Then there are eSata ports, HDMI and dual-mode Display Ports.

          My favorite innovation is Dell's clear SETUP screen pre-Windows boot. I actually UNDERSTAND what the options are, and there are a ton of options I've never seen on any other machine I own. Security options, the Intel V Pro and other stuff clearly explained, the ability to turn off some ports but not others, all kinds of useful things you can do to reduce power or increase it.

          And they explain everything in the documentation, provide all kinds of tips and tricks. The quibble is that the search engine within Dell's website is not that good, so you have to google outside Dell, to find it.

          Not only that, but check this out: I log into Dell with my MACHINE, and it detects my service tag, can run diagnostics and tell me everything I have on that machine, check for all the upgraded drivers or related stuff to THAT machine, then I can download very clear explanations of what they recommend or provide. Especially, I can flash the BIOS without having to make a boot disk, they use executables. That's a real treat.

          I'm sold, baby. So don't tell me they're not innovative. My other machines are made by HP, Compaq, Acer (which I do like), Xeos, AST, Micron, GRiD, and assorted no-names. Those machines don't even begin to have such flexibility and clarity.
          brainout
          • I've had a new Dell desktop for about 3 months

            and I love it. And the price was right. I had no idea it has all the features you mention.
            tboneJoey
    • Hardly junk

      Unless I'm simply imagining that my 7 year old Dell XPS 400 is running the latest and greatest with nothing more upgraded or changed than a ram upgrade to 3GB and a video card upgrade to 1GB - all else is stock. And I simply must be imagining that all the other Dells I service - a few of them the same vintage as my Dell at home - are working with no hardware issues and very few software issues... and those few were a direct result of running Vista, once I upgraded to 7 on those machines the software issues went away.

      Add to that the fact that Dell is the #3 PC manufacturer (PC being used as Windows Computer) your theory/hope that Dell is circling the drain makes little sense.
      NonFanboy
    • Gone in 10 years? Apple will be gone first.

      So, which prediction do you think will be more accurate by the end of those 10 years?

      BTW, 10 years is the same as not making a prediction, and it's not a bold prediction, because, by then, too many other things could have happened, like, selling to some other larger company, or merging with some other company, or simply becoming something else entirely, like a cloud and services provider, which would mean that, the original Dell will have gone bye-bye, but not the company itself.
      adornoe
    • So all pc's are now junk?

      Since Lenovo, HP, Dell, Acer, Toshiba (actually, toshiba is junk, every one we've resold, we regret. Don't resell anymore) etc... all source the same hardware, even Apple, they must all be junk? Interesting take.

      Now as a Dell reseller for the past 12 years, in my opinion, their consumer grade pc's are less than ideal, all made haphazardly w/ the cheapest components, just like HP, Lenovo and the rest.

      The business line of PC's, after deploying over 2500 (conservatively), only occasional issues that are attributed to hardware, a couple of models did have a large # of problems, that Dell quickly addressed when needed. I think this is fairly consistent across all major manufacturers, as far as their business line of products are concerned. The business class tend to be more consistent with what components are used.
      tswartz
      • Cheap components? Well, my machines are over 20 years old, going strong

        Lessee.. I'm only one person owning a bunch of Dell PCs which only I operate. How many do I have, now? one 386, still works fine since the late 1980's; three Win98SEs, one not working only because I opened it and screwed up the controllers, which I can fix; these all date back to the early 1990s. Three laptops, one still on Win98SE, working just fine, 'talks' to all my DOS machines; two just-bought Win7 lappies, both refurbished. Four desktops, two on XP, both from 2004-2005 or so. The other two I just got in November from dellauction. So that's 11 machines which only I operate, four purchased used, since November.

        My other 13 machines are from various manufacturers. Four of them don't work anymore, but could easily be made to work again, if I get the parts. One of the Dell's zip drives died, but that's a problem with Zip drives; and the power supply on another went out when a Windows update trashed the machine, right in the middle of the update. Got it fixed.

        Pretty good stuff, not at all cheap parts.
        brainout
    • Errr....

      Your predictions [let alone comments] generally mean zilch. Try and be anti-biased and maybe some may actually believe you.

      You "predict" but make no reasons why.

      OK. What components in a Dell desktop [for example] can't be found in another brand and are inferior? Hard disk? Memory? DVD burner?
      Gisabun
    • predicting the future...

      itguy10.....I saw a LOT of similar comments ... 12 years ago , leveled at Apple.

      If you can predict the future.... why waste this talent here?
      jrlambert
  • Well... Looks like Microsoft wants to play Apple's game...

    ... and get into the Hardware/Software Technology Ecosystem game. Look for Dell to become the "Official" hardware platform of Microsoft, and all other players merely "Licensees".

    Dude. You're getting a MicroDell.

    mnem
    No, no, no. Let me light that for you.
    mnemennth
    • You make it sound

      Like it is a bad thing? Only if Dell's goes after all the manufacturers to stop producing PC's, it would take a page out of Apple's book. I don't think that even MS would be stupid enough to let that happen.
      Snarfiorix
    • Huh?

      Read the article. It is a ***LOAN***. They didn't buy into Dell.
      Gisabun
  • Dell Pc's not junk

    @itguy10 - Dell hardly makes junk by any stretch of the imagination. They make descent quality computers that are priced reasonably. Do you really think Cities and Organizations (Ford, GM, PnG, etc) center their purchases around Dell equipment becuase it's bad?

    Not sure why you would state that ... but you're wrong.

    As for them being around in 10 years? That applies to all PC makers. Intel is moving toward integrated chips permanently attached to a motherboard (like apple). That'll put the squeeze on PC makers, especially those that make hybrid performance boxes. I wholeheartedly disagree with those that think desktop PC's will be gone in 10 years -- What is the alternative - Tablets, Notebooks, phones? Yeah -- we'll develope the next generation software on toys like that!!! NOT

    Overall -- I like Dell equipment.
    phil.beach@...
  • Um, Dell never left the private sector

    Publicly traded companies are not public sector companies.
    baggins_z
    • Editorial hiccups

      This morning... apologies. Corrected, and thanks for the note! You're right: Dell was public and went private, but was never a 'public sector' company.
      zwhittaker
  • Personally, I've never understood staying a public

    company. Yeah, maybe you need to do it to get some cash, but you should go private again as soon as possible. There's just too much big brother breathing down your shoulder when you are publicly traded, making it hard to take the risks.
    baggins_z