Dell founder to take PC maker private in $23b 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.
Frequently Asked Questions about this Article…
Dell has unveiled plans to go private in a deal valued at about US$24.4 billion. The buyout would also include an offer price of US$13.65 per share, according to the article.
Michael Dell says going private will let the company remake itself away from Wall Street’s short-term pressures, secure long-term partners and give Dell time, investment and patience to transform the business — particularly as it shifts toward data centres and corporate software services.
The buyout relies on multiple sources: Michael Dell is betting his stake and roughly US$700 million of his own fortune, private equity firm Silver Lake is contributing about US$1 billion in cash, and Microsoft has agreed to lend Dell US$2 billion. The deal will also add about US$15 billion of new debt to Dell’s balance sheet.
Yes — the article states Michael Dell will maintain control of the company if shareholders approve the deal, keeping leadership continuity as the company goes private.
According to the article, the buyout is a big gamble: it saddles Dell with about US$15 billion in new debt and doesn't by itself address the broader forces reshaping the technology industry that have eroded Dell’s PC business. The company’s shares have fallen 31% over the past five years, underscoring investor concern.
Dell’s share of the contracting PC market slipped to 10.7% last year, down from 16.6% six years earlier. The company has fallen to third place behind Hewlett‑Packard and Lenovo.
The buyout is intended to give Dell the runway to accelerate its transformation into data centres and corporate software services. The article notes Michael Dell has focused on those areas, but so far the shift has yielded little and will require more time and investment.
At the time of the article Dell shares had closed at US$13.42, which was below the buyout offer price of US$13.65 per share. The article also notes shares have declined about 31% over the past five years.
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