Dell goes private with Microsoft cash

February 6, 2013 | 11:02

Tags: #financial #michael-dell #retail #silver-lake

Companies: #alienware #dell #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.'
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