Dell Goes Private: Now What?

Michael Teague  |

After much speculation about the fate of the company, Dell, Inc. (DELL) has announced that it will be going private as part of a $24.4 billion deal whose players include CEO Michael Dell himself, the global technology investment firm Silver Lake, and a $2 billion cash investment from Microsoft (MSFT).

Michael Dell, who is ranked among the world’s 50 richest billionaires, has been dealing with a variety of obstacles since 2004, when he handed the reins of power over to top lieutenant Kevin Rollins.  He departed when the company was still sitting comfortably atop the PC market, but a subsequent decline in sales and customer service forced him back in January of 2007.

DELL’s biggest obstacle, irrespective of the inner goings-on of the company, has largely been the result of a massive shift in consumer demand from personal computers to mobile devices and tablets. With little success, the company has tried to tap into the latter market, where they have so far stood little chance against giants Apple (AAPL) and Google (GOOG). Furthermore, since 2004, they have been overtaken in the PC arena as well. Competitors Hewlett Packard (HPQ) and Lenovo Group Limited (LNVGY) have for a considerable period of time enjoyed relative dominance in personal computers.

The terms of the deal as it stands will see shareholders receive an underwhelming $13.65 per share.  HP, which also was reported to be considering a breakup of its own company, has since responded to the move by predicting that DELL’s “ability to invest in new products and services will be severely limited”, especially given its debt load,and Lenovo has also been dismissive of “distracting financial maneuvers”.

Meanwhile, Michael Dell himself has explained the logic of the move, saying that going private will free the company from the distractions of the market and shareholder temperaments, providing it with more energy and resources to diversify products and services, and bolster customer service: "Without having really the scrutiny that is associated with a publicly traded stock, we can make the necessary investment and stick to plan, in some cases be more aggressive than we can today”.

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