Michael privatises Dell, delists from Nasdaq

30 Oct 2013

Struggling personal computer maker Dell Inc. is finally going private after the $24.9-billion buyout deal by its founder Michael Dell was bitterly opposed by activist investor Carl Icahn.

Dell was delisted from the Nasdaq at the close of yesterday's trading, more than a month after shareholders approved the $13.88 per share offer plus a 13-cent special dividend from the company's CEO Michael Dell and private equity firm Silver Lake Partners (See: Dell shareholders approve Michael Dell's $25-bn offer).

The offer price of $13.88 is a far cry from Dell's high of over $50 in 2000.

The closing of the transaction follows a two-month bitter fight between Michael Dell and Icahn, Dell's second-largest shareholder, who opposed the deal saying that the offer price was far too low and that Michael Dell was trying to steal the company (See: Icahn files suit against Dell in buyout bid).

Michael Dell will now own about 75 per cent of the Texas-based company and remain its CEO, while Silver Lake will own the remaining 25 per cent.

Analyst wonder whether Michael Dell can turn around the company in a post-PC era.

With the introduction of inexpensive tablets and low-end machines used primarily for consumption in mature and developed markets, the global PC and mini-notebook market has shrunk, denting the bottomline of PC manufacturers.

In its second quarter PC shipments report released in July, technology research firm Gartner said that global sales of PC's have fallen for the fifth quarter in a row, making it the "longest duration of decline" in history.

Gartner said that Dell's shipments for the quarter declined compared to a year ago, but its 2Q13 results showed a smaller decline than the past several quarters.  Although Dell showed good growth in the US and Japan, it struggled to increase shipments in Asia / Pacific and the EMEA.

Research firm IDC projects tablet sales to surpass PC sales in the fourth quarter of this year.

Dell, which once ruled the global PC market, is now trying to move into the relatively unfamiliar field of enterprise computing services as sales of computers have shrunk in the face of increasing demand for mobile devices and laptops.

Michael Dell, has often said that he would like to restructure the company away from the critical eye of Wall Street, cut  costs and jobs, and diversify into the more profitable data storage and enterprise software business.

Although the PC business is dying and Dell missed the tablet boom, the company did see the coming of the cloud computing boom and invested around $14 billion in this segment.

This investment is expected to pay off in the coming years, and Dell estimates a 15-per cent return on its investment.

''Today, Dell enters an exciting new chapter as a private enterprise,'' said Michael Dell. ''Our 110,000 team members worldwide are 100 per cent focused on our customers and aggressively executing our long-term strategy for their benefit.''

In 2008, Michael Dell had acquired his younger brother Adam Dell's email-management software firm MessageOne, for  $155 million in cash, in a bid to boost Dell Inc's bottom line by adding profitable revenue streams (See: Dell acquires MessageOne, which is also a sibling's company).