Dell founder to take PC maker private in $23b deal
THE PC manufacturer Dell has unveiled plans to go private in a $US24.4 billion ($23.6 billion) deal.
It is a bold move out of Wall Street's spotlight as the company tries to remake itself in a world where PCs are no longer the big business in technology.
The buyout is a huge gamble. It will saddle Dell with $US15 billion of new debt, and it does nothing to divert the forces reshaping the technology industry and undercutting the company's business.
Fifteen years ago, Dell made enormous profits by selling customised PCs directly to customers. Six years ago, it was the world's leading maker of PCs. Today, it is in third place, behind Hewlett-Packard and Lenovo, and still falling.
Dell's share of a contracting market for PCs slipped to 10.7 per cent last year, from 16.6 per cent six years earlier.
Its founder, Michael Dell, is betting his stake in the company and about $US700 million of his fortune that he can meet the challenge and turn around a business he started in 1984 in his dormitory room at the University of Texas.
"Dell's transformation is well under way, but we recognise it will still take more time, investment and patience," Mr Dell wrote in a memo to employees. "I believe that we are better served with partners who will provide long-term support to help Dell innovate and accelerate the company's transformation strategy."
Mr Dell will maintain control of the company if its shareholders approve the deal. The private equity firm Silver Lake, one of the most prominent investors in technology companies, is contributing about $US1 billion in cash.
And Microsoft, seeking to shore up one of its most important business partners, has agreed to lend Dell $US2 billion.
Despite taking on an additional $US15 billion in debt, Dell and Silver Lake say the company will survive, thanks to the cash that the PC business still generates. The deal is the biggest test yet for Mr Dell, 47, who has a personal fortune estimated at $US16 billion. After a three-year absence, he returned as the chief executive of the company in 2007.
His focus has been on moving into the business of data centres and corporate software services. So far, that has yielded little. Dell's shares have fallen 31 per cent over the past five years, closing on Tuesday at $US13.42 - below the buyout's offer price of $US13.65.