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Dell goes private with Microsoft cash

Dell goes private with Microsoft cash

Dell is now a private company once more, thanks to a $24.4 billion buyout package that includes cash from company founder Michael Dell and software giant Microsoft.

Dell has confirmed rumours it was planning to go private, announcing a buyout package from the Silver Lake investment group alongside Microsoft and Michael Dell himself.

When the founder set up his PC retail operation, he did so as a one-man outfit in 1984 with just $1,000 in capital. Dell was amply rewarded in 1988 by the company's initial public offering that gave it a market capitalisation of $85 million - not bad for four years' work. It's no secret that in recent years the company has been struggling, however: the economic slump, a general slowing in the PC market and a half-hearted attempt to get into the tablet and smartphone market that was seen as too little too late have all conspired to bring the company low - not that you could easily tell by the company's $21.35 billion valuation.

To save Dell from investors' foibles, the company has announced a buyout package that will see it return to being a privately held corporation for the first time since 1988. Under the terms of the deal, the company has been valued at $24.4 billion - higher than its market capitalisation - with the bulk of the cash coming from private investment group Silver Lake. Interestingly, Microsoft is also becoming a shareholder, taking an eight percent stake in exchange for $2 billion in cash. Michael Dell, meanwhile, has put in an undisclosed sum - thought to be close to $1 billion - through his own investment firm, and retains a 14 per cent stake in the company.

For now, it will be business as usual at Dell: Michael Dell retains his position as chief executive officer, and his cash has assured him better financial control of the firm. In the long term, however, the company has some hard decisions to make - and Microsoft's investment suggests that those decisions are going to revolve heavily around Windows, which could spell trouble for the company's fledgling Linux products including the developer-targeted Project Sputnik.

Meanwhile, Michael Dell's comments to staff regarding the move back to being a privately-owned company have been shared via a confidential memo leaked to CRN, which describes the buyout as 'an exciting new chapter for Dell, our team and our customers.'

15 Comments

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Mankz 6th February 2013, 11:16 Quote
I see it as a good move. Without having to report to shareholders every quarter, they can spend the money where and when they need to to be innovative. This way they can post loses in two quarters, based on R&D say, and then post profits at other points, and everyone doesn't jump ship, destabilising it.
Guinevere 6th February 2013, 11:31 Quote
I wonder what his 'grand plan' is? Keep the focus on the enterprise sector alone? HP & IBM are still top of the game but Dell's doing okay there.

Or go for the consumer space a bit more aggressively? Dell have always been a bit... shall I say lacklustre... when it comes to selling profitable gear to the end consumer in high volumes.
Harlequin 6th February 2013, 11:55 Quote
the spotlight from teh stock market wouldnt help ` oh you lost 1% so your share price drops`

Apple would do well to buy back as well
jrs77 6th February 2013, 11:56 Quote
Best move from a company as big as Dell I've ever seen. The shareholders ruin alot of companies, or better said, the companies ruin themselves to pay higher dividends to the shareholders.
Spraduke 6th February 2013, 12:18 Quote
If I created a successul business I would go the route of John Lewis/Waitrose group and give a share to the staff. Guarantess hard working and loyal staff who want to see the company prosper, not some speculative city trader who decides its time to short sell your shares for no solid reason.
Kovoet 6th February 2013, 12:21 Quote
I only hope we do not lose our warranties though
rollo 6th February 2013, 17:04 Quote
Wont be the last major tech company removing themselfs from the stock market this year.

Why would warranties be affected its not like dell are going bankrupt they are just buying themselfs off the stock market.

Which as far as i can tell is only a good thing.

Means more cash for R&D projects less worrying about pleasing stupid investors who jump ship every other quater.
Cthippo 6th February 2013, 20:51 Quote
It seems like MS wants to become more of a hardware company than they historically have been, and this would give them something of a toehold in the consumer and enterprise markets for hardware.
Gradius 6th February 2013, 22:38 Quote
The title isn't correct, it appear M$ has buyed the company, but only put mere $2 billions, while the fundation put another $1 billion, where the rest comes from? Not from M$ !
Zephyr 6th February 2013, 23:29 Quote
Quote:
Originally Posted by Gradius
The title isn't correct, it appear M$ has buyed the company, but only put mere $2 billions, while the fundation put another $1 billion, where the rest comes from? Not from M$ !

It's 2012...really with the M$? Were you born in 2000?

Good for Michael Dell. With all the speculation about Dell's future this is the most powerful political statement he can make at this time. Shareholders DO ruin companies and people very quickly forget the wins during times of loss. At this point Dell either transforms their company or goes under, and if they manage to succeed it's better for the consumer electronics industry and consumers on the whole.

I think the most interesting thing here is Microsoft's investment. It could create a massive market for a Microsoft/Dell co-marketed brand to improve Dell's corporate performance and continue with Microsoft's repositioning as something similar to Apple.
Necrow 7th February 2013, 10:15 Quote
Quote:
Originally Posted by Zephyr

It's 2012...

You sure?

Good move by Dell, hopefully this will also drop the costs of PC's and Servers and will allow them to spend more in R&D and develop new tablets
rollo 7th February 2013, 10:21 Quote
Ms bearly owns 10% of the total investment.
lacuna 7th February 2013, 10:56 Quote
Quote:
Originally Posted by rollo
Ms bearly owns 10% of the total investment.

I would say its more like 8%. As per the article.
koola 8th February 2013, 10:44 Quote
Will be interesting to see what perks Dell gets from MS over HP. There is bitter rivalry between the two and with MS taking a strategic share in Dell, it could well provoke more hostility between the two.
Spreadie 8th February 2013, 12:45 Quote
Here's hoping it works for Dell.

I wonder if this will be seen as the start of a trend, with larger companies courting private investment and shunning the panicky herd mentality of the stock market?
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