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Dell goes private with $2bn help from Microsoft

Dell

By Nicole Kobie

Posted on 5 Feb 2013 at 14:55

Dell has been taken private as part of a $24.4 billion deal that includes a massive loan from Microsoft.

The long-rumoured deal sees CEO Michael Dell take the firm he founded private, alongside investment firm Silver Lake Partners and a $2 billion loan from Microsoft.

"Microsoft is committed to the long-term success of the entire PC ecosystem and invests heavily in a variety of ways to build that ecosystem for the future," Microsoft said in a statement. "We're in an industry that is constantly evolving. As always, we will continue to look for opportunities to support partners who are committed to innovating and driving business for their devices and services built on the Microsoft platform."

The $24.4 billion price is a 25% premium over the share price on 11 January, when rumours of the deal leaked out, the company said.

"I believe this transaction will open an exciting new chapter for Dell, our customers and team members," Michael Dell said. "We can deliver immediate value to stockholders, while we continue the execution of our long-term strategy and focus on delivering best-in-class solutions to our customers as a private enterprise."

The deal was welcomed by HP, which appeared to take it as a sign of troubles at its rival - and hope to grab some of its business.

"Dell has a very tough road ahead," the HP statement said. "The company faces an extended period of uncertainty and transition that will not be good for its customers."

"And with a significant debt load, Dell's ability to invest in new products and services will be extremely limited," the statement continued. "Leveraged buyouts tend to leave existing customers and innovation at the curb. We believe Dell's customers will now be eager to explore alternatives, and HP plans to take full advantage of that opportunity."

Substantial capital

Dell said he had put a "substantial amount of my own capital at risk" to make the deal work. He previously owned 14% of shares in the company, and made a "substantial additional cash investment".

Dell will continue to run the company as CEO and chairman of the board.

The deal has been in the works since August, but isn't yet finalised, as competing bids will be considered over the next 45 days.

Dell founded the company in 1984, taking it public four years later, where it was valued at $85 million. When he stepped down in 2004, the company had annual revenue of $55 billion, according to the Financial Times. Dell returned as CEO in 2007.

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User comments

Famous last words

Ironically he's following the advice he gave to Apple way back when when he told them to give up and return the money to shareholders. Funny how Apple is worth twenty times what Dell is worth today.

It's probably a sensible thing to do though, given most of Wall Street's unfailing lack of attention to anything much beyond the next quarter or two; in the tech business you really need to think ahead. Having always to report quarterly figures to the market can't have helped with any long term planning.

And as we've seen with the silly cries of "Apple need a cheaper phone to avoid losing market share" when Dell had to chase market share, profitability went downhill fast and the company nearly collapsed. Now maybe they'll do the sensible thing and seek profit instead. Market share is only important for supermarkets and the like.

Hardly completely private though when one of the investors is a big private equity firm, and the other is Microsoft. The PE firm will want its money back one day, plus profit, and so will MS.

By SwissMac on 5 Feb 2013

@SwissMac

Private just means it is not financed by publically quoted equity capital. In short all it means is the company is financed directly by investors rather than via NY Stock Market.

Perhaps MS's investment will save Dell like it did Apple which was also in poor shape at the time. Oh no, I hope Dell doesn't start adopting Apple's rip off prices or proprietary lock in tactics ;-))

By rjp2000 on 5 Feb 2013

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