February 5, 2013
After weeks of rumored talks, Dell has announced its sale to Microsoft, Silver Lake Partners, and founder Michael Dell for $24.4 billion, the biggest leveraged buyout since the 2008 financial crisis. The company went for $13.65 per share to its investors, according to DealBook's Michael De La Merced. Dell will own the largest stake at 16 percent, valued at $3.7 billion, after the transaction. In addition, Microsoft put in $2 billion, Silver Lake put in another $1 billion and BofA Merrill Lynch, Barclays, Credit Suisse and RBC Capital Markets put in a $15 billion debt financing package, as well. For those just catching up to the weeks of rumors, here's what it all means:
Why does Dell want to go private?
In short: It's not doing so well as a public company anymore. Over the last year its stock has seen a steady decline, which only had an uptick once rumors of its sale started circulating around mid-January, as you can see below. As you can see, the sale price of $13.65 is somewhere around a 25 percent premium on what the stock was trading at before the rumors of a sale began. The move also has a lot to do with the ego of its founder, sources told The Wall Street Journal's Ben Worthen and Anupreeta Das. "Interviews with current and former Dell executives, plus other people who know the CEO, paint a picture of a man who appeared increasingly worried about his legacy," they write. He also hated the comparison to Apple, or what his company could have been.
Why all the financial trouble, though?
While "Dell Dude" Ben Curtis would say his absence from the company's advertising was the cause of its downfall, the computer-makers financial troubles have coincided with the death of the PC. For Dell in particular, its global computer shipments, which make up most of its revenue, declined by about 5 percent last quarter from the year before. A lot of that has to do with the increasing popularity of tablets and mobile phones. Tablet sales, for example, have grown from 17 million in 2010 to 122 million in 2012,according to a report from Business Insider. Mr. Dell himself admits he was surprised by the rise of these portable computer slabs. "I didn't completely see that coming," he told Worthen and Das. In addition, the poster-child for early '00s dorm room computers also failed to make the transition from hardware to business services, something its founder tried and failed to do, they add.
Read more at The Atlantic Wire.
February 5, 2013