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Dell going private in $24.4B deal, aided by $2B loan from Microsoft

post #1 of 72
Thread Starter 
Computer maker Dell announced on Tuesday that it would be going private in a $24.4 billion deal involving a private equity firm and software giant Microsoft.

Dell Inc.'s board is said to have unanimously voted Monday night on the deal, which will see Silver Lake and Microsoft paying $13.65 per share for the Round Rock, Texas-based PC maker. That is a 25 percent premium over the company's closing share price on Monday, a 35 percent premium over its enterprise value as of January 11, and a 37 percent premium over its average closing share price during the previous 90 calendar days ending January 11.

Dell Ultrabook


Chief Executive Officer Michael Dell will be contributing his own 15.7 percent stake, valued in excess of $3.6 billion, as well as another $700 million from his personal fortune. Mr. Dell will thus take a majority stake in the company, according to reports, and will remain Chairman and CEO of the company.

Financing of the transaction will consist of a combination of Mr. Dell's cash and equity, cash from Silver Lake's investment funds, cash invested by MSD Capital, a $2 billion loan from Microsoft, rollover of existing debt, and debt financing from Bank of America Merrill Lynch, Barclays, Credit Suisse, and RBC Capital Markets, as well as Dell's cash on hand.

The deal is still subject to approval from unaffiliated stockholders.

Speaking on the deal, Mr. Dell said it would signal "an exciting new chapter" for the PC maker, with the buyout delivering "immediate value to our shareholders, 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." Dell said the company had made progress over the past four years, but that going private would allow the firm the "time, investment, and patience" necessary to see that progress through.

Since 2009, Dell's share price has moved from peak to trough, hitting a high of $18.16 in February of 2012, and falling sharply thereafter, only to spike again as rumors of a buyout increased. The PC manufacturer has seen its fortunes waning as the consumer computing market has moved away from the traditional platforms in which Dell specializes and toward smartphones and tablets. Dell's own efforts to enter the mobile computing segment have seen lukewarm receptions at best.
post #2 of 72
At least, he's putting his money where his mouth is. He's giving back the money to shareholders...

Social Capitalist, dreamer and wise enough to know I'm never going to grow up anyway... so not trying anymore.

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Social Capitalist, dreamer and wise enough to know I'm never going to grow up anyway... so not trying anymore.

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post #3 of 72
First one citing that old line from Michael is, well, he just is!

edit: already done, some 26 seconds before me.


Well, sounds like overpaid, bit like Google's 12.5B for Motorola Mobility. What to expect, Airbook clones from MS?
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"See her this weekend. You hit it off, come Turkey Day, maybe you can stuff her."
- Roger Sterling
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post #4 of 72

Can't wait to see Apple doing the same (for different reasons).

 

I really like what Dell is doing. Ubuntu high end laptops, more quality, etc. It's a shame they accepted Microsoft's bribe, so we won't see high-class chromebooks...

 

I really hope they go head on software and services, maybe even a new Office suite to compete on the windows market (that's still huge), more contribution to open source, mac apps (this one would be great). 

post #5 of 72

I could care less about Dell, but this is a good move for them. 

I'm not a pessimist. I'm an optimist, with experience.
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I'm not a pessimist. I'm an optimist, with experience.
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post #6 of 72

700 million of his own personal fortune.....damn that's a lot of money.  Do they take checks?

post #7 of 72

my how the worm has turned! Steve must be looking down, smiling!!

post #8 of 72

"and focus on delivering best-in-class solutions to our customers"

 

Best-in-class?  Hmmmm.... a new strategy.

 

I'll believe it when I see it.

 

Should have focused on that a long time ago Mike.
 

na na na na na...
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post #9 of 72

I'm surprised that no one has yet commented on the possible implications of Microsoft purchasing a large stake in Dell.

post #10 of 72
Quote:
Originally Posted by lightknight View Post

At least, he's putting his money where his mouth is. He's giving back the money to shareholders...

 

I'm surprised that no one has pointed out the irony in the articles i've read about this so far.  He is indeed doing the exact thing that he said Apple should do in that famous stupid quote of his. 

post #11 of 72
Quote:
Originally Posted by anonymouse View Post

I'm surprised that no one has yet commented on the possible implications of Microsoft purchasing a large stake in Dell.

Microsoft does nothing...

 

That's just a "no chromebooks please!"

post #12 of 72
Quote:
Originally Posted by anonymouse View Post

I'm surprised that no one has yet commented on the possible implications of Microsoft purchasing a large stake in Dell.

What are your thoughts - MS to make their own hardware with Dell's help?

 

Imagine how it would shake up the tech world if MS decided to only sell Windows with their own hardware? All those third party computer makers overseas would be left with only Linux.

post #13 of 72
Quote:
Originally Posted by Gazoobee View Post

 

I'm surprised that no one has pointed out the irony in the articles i've read about this so far.  He is indeed doing the exact thing that he said Apple should do in that famous stupid quote of his

What stupid quote? Are you insinuating something?

 

 

 

/s 1devil.gif

post #14 of 72
Cool, he has done step 1, bought it back. Now when does he shut it down?
post #15 of 72
Quote:
Originally Posted by pedromartins View Post

Can't wait to see Apple doing the same (for different reasons).

 

I really like what Dell is doing. Ubuntu high end laptops, more quality, etc. It's a shame they accepted Microsoft's bribe, so we won't see high-class chromebooks...

 

I really hope they go head on software and services, maybe even a new Office suite to compete on the windows market (that's still huge), more contribution to open source, mac apps (this one would be great). 

 

I don't understand your comments.  If Microsoft is buying Dell (and they basically are despite the details), there won't be any more Ubuntu laptops, Chromebooks etc. 

 

Anyone can see this is "Dell going private" merely as a preamble to being absorbed/destroyed by Microsoft.  They've done this enough times, it should be clear to everyone.  

I must admit I admire how Microsoft is doing this lately without *technically* having to buy the company.  Like the way they enslaved/destroyed Nokia, and forced them to do their bidding and become a Microsoft subsidiary without *technically* having to buy them out.  It saves way more money that way and there's less downside for Microsoft itself.  

 

Here they've managed to essentially "capture" Dell, for only 2 billion dollars.  It's a business victory even if it isn't a victory for common sense.  

post #16 of 72
Quote:
Originally Posted by anonymouse View Post

I'm surprised that no one has yet commented on the possible implications of Microsoft purchasing a large stake in Dell.

 

I think MSFT is only providing a loan and not taking an equity stake.  They clearly have a vested interest in getting the deal done (otherwise why lend the cash) but I don't think they are taking an active management role in Dell, just becoming a creditor. 

post #17 of 72

Phase 1 - collect underpants

post #18 of 72
Quote:
Originally Posted by island hermit View Post

"and focus on delivering best-in-class solutions to our customers"

 

Best-in-class?  Hmmmm.... a new strategy.

 

I'll believe it when I see it.

 

Should have focused on that a long time ago Mike.
 

Well said....I put Dell in that class of companies that are just trying to sell "crap" as expensively as possible to a lot of unsuspecting customers. I like companies that "best in class" is already in their DNA. If I worked for Dell, I would be ashamed of the sh*t they have been producing! :)

post #19 of 72
Quote:
Originally Posted by ascii View Post

What are your thoughts - MS to make their own hardware with Dell's help?

 

Imagine how it would shake up the tech world if MS decided to only sell Windows with their own hardware? All those third party computer makers overseas would be left with only Linux.

 

They are somewhat constrained on at least Intel x86 hardware in that regard, but not on other CPU architectures.

post #20 of 72
Quote:
Originally Posted by wubbus View Post

 

I think MSFT is only providing a loan and not taking an equity stake.  They clearly have a vested interest in getting the deal done (otherwise why lend the cash) but I don't think they are taking an active management role in Dell, just becoming a creditor. 

 

It does seem that it's just a loan, and that they are committing to bailing out at least the major players in the PC industry, if necessary. Who would have foreseen that need a decade ago?

post #21 of 72
Quote:
Originally Posted by anonymouse View Post

I'm surprised that no one has yet commented on the possible implications of Microsoft purchasing a large stake in Dell.

 

It will be interesting to see the results of the competing forces. On one hand you have the usual strategy of drowning the company with debt used to pay back investors with a profit. On the other you have Microsoft looking for another captive "partner" like Nokia.

post #22 of 72

This is likely the beginning of a long, slow march to the gallows for Dell ... much like RIM (now BlackBerry). They've amassed a large following over the years and volume sales to companies, government agencies, and others have given them a large enough base to keep the afloat for at least a few more years, but it looks like it's going eventually close up shop (or get bought out by Microsoft).  When was the last time you saw someone using a Dell laptop or desktop that WASN'T supplied by their employer?

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post #23 of 72
I think we can finally let that Michael Dell quote go.

"There is no rule that says the best phones must have the largest screen." ~RoundaboutNow

 

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"There is no rule that says the best phones must have the largest screen." ~RoundaboutNow

 

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post #24 of 72
Quote:
Originally Posted by ascii View Post

What are your thoughts - MS to make their own hardware with Dell's help?

 

Imagine how it would shake up the tech world if MS decided to only sell Windows with their own hardware? All those third party computer makers overseas would be left with only Linux.

 

Or Google Chrome.  If MS decided to only sell WIndoze on their own hardware (not likely, really) then Google's market share will skyrocket. 

post #25 of 72
Quote:
Originally Posted by island hermit View Post

"and focus on delivering best-in-class solutions to our customers"

 

Best-in-class?  Hmmmm.... a new strategy.

 

I'll believe it when I see it.

 

Should have focused on that a long time ago Mike.
 

 

Quote:
Originally Posted by christopher126 View Post

Well said....I put Dell in that class of companies that are just trying to sell "crap" as expensively as possible to a lot of unsuspecting customers. I like companies that "best in class" is already in their DNA. If I worked for Dell, I would be ashamed of the sh*t they have been producing! :)

I think too many people reading these articles are only thinking about consumer "crap" from Dell. Microsoft makes a ton of money on enterprise and SMB installations. Just look at their excessive client licenses. Dell servers are still being bought heavily by enterprise and government customers so whether Microsoft's payment was a true loan or a way into future ownership of Dell, it doesn't really matter as long as Microsoft still can sell their over-priced server-based applications to Dell hardware purchasers. Apple gave up on providing server hardware because they couldn't make money on it. At this point, Microsoft doesn't have to make money on Dell hardware, they just need customers to continue buying Dell servers so they can sell (force them to buy) Microsoft software. All those people who think linux server software is king hasn't been in a government installation where (almost) everything is run on Windows servers. 

 

Personally I think Dell products are garbage but that's what businesses and the government can afford. They depreciate them quickly and re-purchase the same type of garbage 3-4 years later, having written off the original purchase. Consumers don't have a way to do this unless they also have a small business. Apple products are meant to be used for longer than 3-4 years, which doesn't fit into the typical corporate depreciation schedule. Microsoft might have just made one of their better acquisitions in a long time. It's obvious nothing they create actually sells but their enterprise software still has a huge market with lots of income.

 

I can't believe I actually gave Microsoft a compliment. I need to go see a shrink!!

post #26 of 72
Quote:
Originally Posted by Gazoobee View Post

I'm surprised that no one has pointed out the irony in the articles i've read about this so far.  He is indeed doing the exact thing that he said Apple should do in that famous stupid quote of his. 

I'm not sure how anyone can say it's stupid. He said what he would do. He! He didn't say what Steve Jobs should do or make any claims that no one could salvage Apple. That may have been his implication because he, a CEO of a PC company, couldn't see how Apple could be saved, but his words weren't words as such to say it was not savable, only that he would shut it down and give the money back to the shareholders.

PS: If we were to apply his 1997 quote to Dell he's only followed through with half the quote since he has not (yet) shut it down.
Edited by SolipsismX - 2/5/13 at 8:19am

"There is no rule that says the best phones must have the largest screen." ~RoundaboutNow

 

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"There is no rule that says the best phones must have the largest screen." ~RoundaboutNow

 

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post #27 of 72
Quote:
Originally Posted by SolipsismX View Post

I think we can finally let that Michael Dell quote go.

I guess it pays to be careful what you say, you never know what people will remember.
post #28 of 72
Quote:
Originally Posted by JeffDM View Post


I guess it pays to be careful what you say, you never know what people will remember.

I'll remember that...

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post #29 of 72
Quote:
Originally Posted by thataveragejoe View Post

I could care less about Dell, but this is a good move for them. 

 

How much less could you care?

post #30 of 72
Quote:
Originally Posted by thataveragejoe View Post

I could care less about Dell, but this is a good move for them. 

 

How much less could you care for them as a company? Personally I couldn’t care less, but based on your statement I deduce that you must care for them, at least a little bit.

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post #31 of 72
Quote:
Originally Posted by hittrj01 View Post

How much less could you care?

Do we really need another discussion on this expression? I we did this only 2-3 weeks ago.
post #32 of 72
Quote:
Originally Posted by JeffDM View Post


Do we really need another discussion on this expression? I we did this only 2-3 weeks ago.

Have the Brits been out in force regarding this expression before then?

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post #33 of 72

Maybe Microsoft should buy the company and then require an activation PC key for all the Computers sold.  Not a CD Key but a PC key.  That way they can dominate people even more with their product!!!  Mean while Dell would die the death it deserved.

An Apple man since 1977
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An Apple man since 1977
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post #34 of 72
Quote:
Originally Posted by lightknight View Post

At least, he's putting his money where his mouth is. He's giving back the money to shareholders...

M.  Dell, the first CEO to tip his hand a couple of decades before he did what he was thinking...

post #35 of 72

It's a good thing Apple isn't doing this, or Uncle Fester would be taking MicroSoft private this week too...

post #36 of 72
Quote:
Originally Posted by pedromartins View Post

Can't wait to see Apple doing the same (for different reasons).

 

 I doubt they could find enough investor funds buy out Apple. People on here refer to P/E ratio consistently, yet often compare to much smaller companies. Think of how many shares exist at their current pricing in this case.

 

Quote:

I really like what Dell is doing. Ubuntu high end laptops, more quality, etc. It's a shame they accepted Microsoft's bribe, so we won't see high-class chromebooks...

 

I like Ubuntu. Unfortunately it won't run several things I would require to switch. There are very specific things that keep me away from Linux, but I like the concept of a lightweight OS. I think it's silly that you call this a bribe when it's either just a loan or a stake in the company.

post #37 of 72
Quote:
Originally Posted by lightknight View Post

At least, he's putting his money where his mouth is. He's giving back the money to shareholders...

 

 

Not really. In my view he robbed the loyal shareholders. First, he duped shareholders into thinking secret money from Intel was being earned from operations. When that was discovered, the shareholders suffered. In 1997 Dell was trading at over 86 dollars a share. Today below 14. Dell ended up having to settle the matter with the government. Second, Dell bought back tons of shares of the company when accounting rules didn't require the company to report that as an expense, which again artificially inflated earnings. This accounting rules were not recommended by the accounting standards body, but put into effect anyway because of tech companies pressure on Congress. Many of these shares the company bought back were given to Dell himself. So essentially shareholders are financing a large part of this buy out through buy backs the company made when it was public. Third, Dell until recently didn't pay any dividend. 

post #38 of 72
Quote:
Originally Posted by SolipsismX View Post


I'm not sure how anyone can say it's stupid. He said what he would do. He! He didn't say what Steve Jobs should do or make any claims that no one could salvage Apple. That may have been his implication because he, a CEO of a PC company, couldn't see how Apple could be saved, but his words weren't words as such to say it was not savable, only that he would shut it down and give the money back to the shareholders.

PS: If we were to apply his 1997 quote to Dell he's only followed through with half the quote since he has not (yet) shut it down.

 

 

Honestly, why does anybody care what Dell said? Was Dell supposed to tell people how he would save a competitor? Apple was a competing company. Dell wasn't going to shed tears if it folded. He was merely throwing salt in a competing players wounds. 

post #39 of 72
Quote:
Originally Posted by rob53 View Post

Personally I think Dell products are garbage but that's what businesses and the government can afford. They depreciate them quickly and re-purchase the same type of garbage 3-4 years later, having written off the original purchase. Consumers don't have a way to do this unless they also have a small business. Apple products are meant to be used for longer than 3-4 years, which doesn't fit into the typical corporate depreciation schedule. Microsoft might have just made one of their better acquisitions in a long time. It's obvious nothing they create actually sells but their enterprise software still has a huge market with lots of income.

 

A question.  Do you have much experience with Dell consumer products?  We have an 8 year old Dell desktop, a 6 year old Dell desktop, we have 3 laptops that are 5 years old, and all are working great and have never had an issue (except when my son dropped his, but warranty fixed everything for free!).  I just don't see the "crap" part to Dell products?!??!?  I previously had an HP laptop, and it lasted all of 2 years before I was hit with multiple issues that would have cost more to fix than a new laptop!

 

I am considering a MacBook Pro for my next laptop though, but have to save for awhile before I can afford it.

post #40 of 72

Buy low, sell high... Dell is working it in both directions. He made a fortune when it went public, and now is giving a small fraction back, now that is isn't worth nearly as much.

 

That said, Dell is suffering, and this may be their only way out.

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