It's Official, Dell Goes Private

February 5, 2013 | Posted By: Bryan Marsden | Categorized in: Finance


Dell was once the largest PC manufacturer in the world. As of late though, they have faced increasing competition from Lenovo, HP, and their sales have slumped. To combat this, Dell has been trying to expand into different technology related services, including the corporate space. The issue with this though is the pressure from shareholders who are not willing to eat quarterly losses to get the new model up and running. They know they have to change, but with shareholder pressure itís an up hill battle.

So what is Dell to do?

They stunned everyone, and took company private, with a buy out of $24.4 billion dollars at $13.65 a share. While it has been a rumor for weeks, it was confirmed this morning. This will allow them to work on their new strategy, without the having to bend over backwards to appease their shareholders.

Taking a company private is not a cheap thing to do, how did they pull this off?

If the information is correct, the private equity firm Silver Lake Partners is one of the major players, with Microsoft adding a $2 billion dollar loan to finance the deal. While neither entity will have a majority share, it should be enough to give them some clout in future business decisions, and it's just a smart business decision for Microsoft. Dell is one of the largest partners Microsoft has, so it's smart of them to make sure that Dell sticks around.

Where does Michael Dell sit in all of this?

Michael Dell would be tossing in his 15.7% of Dell, and offering an additional equity valued at up to $1 billion dollars. This will allow him to have majority ownership of the company he founded.

What does this mean to the average Dell consumer?

Pricing wise, don't expect to see a whole lot of change here. Profit margins on PCs, and electronics in general (outside of Apple) are pretty thin already. If they drop prices much further, it may hurt them more than help them.

What does it mean for Dell business customers?

It should be beneficial for Dell's business services strategy. Rather than having to build their own infrastructure, they could leverage Microsoft's Azure cloud infrastructure which would help Dell when it's ramping up it's business services division.

What do people around the web have to say?

It's a mixed bag. Some say Dell might get more than they bargained for, while others think it's a good thing for everyone. While everyone can make predictions, no one really knows until they get the ball rolling.

What do we think?

Like all of our business partners, we want Dell to succeed. So if Dell needed to go private to ensure that success, then we support that decision. Dell succeeding increases competition, and competition is always good for consumers. What is good for consumers is what really matters to us.

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