Dell reverses course, going public in $21.7B proposal
Apple rival Dell on Monday announced plans to take the PC maker public again, by way of a proposed common stock deal pegging its market cap at $21.7 billion.
Michael Dell with Apple co-founder Steve Jobs.
VMware's tracking stock holders will be able to claim 1.3655 shares of the new common stock, Dell said, or else $109 in cash per share up to $9 billion in aggregate. The deal adds a 29 percent premium to Dell's closing price as of last Friday.
The VMware board of directors has declared an $11 billion cash dividend pro rata for all of its shareholders, contingent on completing other terms of the deal. Dell is expected to claim $9 billion from the dividend.
In a statement, Dell noted that the transaction "simplifies capital structure," and "positions Dell Technologies to build on its growing strategic and financial strength." The company will continue to own 81 percent of VMware's common stock.
Any leftover cash from the transaction will be used for future share buybacks or to pay down Dell's debt. VMware shareholders should end up owning anywhere between 20.8 and 31 percent of Dell, depending on how many people opt for cash instead of new shares.
Dell went private in 2013, giving CEO Michael Dell a majority stake in his namesake company. In all the transaction was valued at $24.4 billion, aided by a variety of sources, including a $2 billion loan from Microsoft.
The executive said going private would give his company the "time, investment, and patience" to make progress. It has increasingly shifted towards the enterprise market, particularly through its 2016 EMC takeover.
The company remains one of the biggest PC makers in the world, for instance beating the likes of Apple, Asus, and Acer in the laptop market. PC sales have struggled to maintain ground though given the growing flexibility of smartphones, tablets, and game consoles.
Michael Dell with Apple co-founder Steve Jobs.
VMware's tracking stock holders will be able to claim 1.3655 shares of the new common stock, Dell said, or else $109 in cash per share up to $9 billion in aggregate. The deal adds a 29 percent premium to Dell's closing price as of last Friday.
The VMware board of directors has declared an $11 billion cash dividend pro rata for all of its shareholders, contingent on completing other terms of the deal. Dell is expected to claim $9 billion from the dividend.
In a statement, Dell noted that the transaction "simplifies capital structure," and "positions Dell Technologies to build on its growing strategic and financial strength." The company will continue to own 81 percent of VMware's common stock.
Any leftover cash from the transaction will be used for future share buybacks or to pay down Dell's debt. VMware shareholders should end up owning anywhere between 20.8 and 31 percent of Dell, depending on how many people opt for cash instead of new shares.
Dell went private in 2013, giving CEO Michael Dell a majority stake in his namesake company. In all the transaction was valued at $24.4 billion, aided by a variety of sources, including a $2 billion loan from Microsoft.
The executive said going private would give his company the "time, investment, and patience" to make progress. It has increasingly shifted towards the enterprise market, particularly through its 2016 EMC takeover.
The company remains one of the biggest PC makers in the world, for instance beating the likes of Apple, Asus, and Acer in the laptop market. PC sales have struggled to maintain ground though given the growing flexibility of smartphones, tablets, and game consoles.
Comments
-Michael Dell 1997
Say no to Dell.
the truth is that nobody wanted an AMD chip in their machine, unless there was a hearty discount. Even after the deals were stopped, and didn’t get their foot in the door, because except for a short time, AMD was a bargain chip company, not a performance leader.
But as it happens, I have some nits to pick with your assessment.
First, there was a stretch of several years when AMD was unambiguously the performance leader. The Athlon was superior to the Pentium 4 and the Athlon 64, especially the X2, was superior to the Pentium 4. AMD even was beating Intel in the server market for a period of time with Opteron, because Intel refused to make a 64 bit x86 chip (trying to push people to Itanium).
Second, exclusivity deals are common and generally legal, but the rules can, do, and should change when a monopolist (or near-monopolist) is involved. This is one of the things I love about Apple's business model -- they aren't close to being a monopolist in any reasonably defined market, so they can do all the exclusive deals they want. You don't like the terms for selling in the App Store? Well, go sell in the Google Play store to a much larger market. Apple's X-power is that they have antitrust prosecution resistance built into their DNA.
Their tracking stock puts the market cap at $18B and they have been loosing money only recently have they turned any sort of profit.
However, after Prescott, Intel shocked everyone who thought they were in a death spiral, by going back to their M series and produced the Yonah, which is what convinced Apple to move to x86. That was thea beginning of the end for AMD, because again, they were far outclassed. With their incredible mistake with Bulldozer, which they stuck with for years and years, it seemed as though AMD was finished.
with their new chips, they’ve regained some life. But as usual, by pricing their chips well below what’s needed for a good profit, they’re on the heavy discount bandwagon. The truth is, they could never sell their chips if they priced them for a good profit.
[totally sincere, but ducks for the inevitable napalm attack]
I'm amazed AMD is still in business after Intel struck back with their Core architecture.
But I think I might be more optimistic about AMD's chances now than it sounds like you are. For reasons that have little to do with AMD, we appear to be on the cusp of the unthinkable -- Intel losing the edge in fab process to the foundries. While volume production with Intel's 10nm process appears to be seriously delayed, at least until the second half of next year, TSMC is coming out with 7nm (what they call "7" is similar to Intel's "10") this year with the iPhone. And thanks to the petrodollars backing GloFo, AMD will have access to a similar 7nm process next year. It's very possible that AMD will beat Intel to the next process node with volume production of the Ryzen 3 (or whatever they choose to call it). Personally, I would not be buying Intel stock right now.
The foundries aren't advancing faster than Intel because they want AMD's business -- they're doing it because they want business from premium smartphone makers like Apple and, to a lesser extent, maybe Nvidia. But AMD gets to go along for the ride and 2019 could be a tough year for Intel.
They made 78B? That doesn’t seem right. Last fiscal year Apple’s profit was 48B. No way Dell makes more profit than Apple. Unless you’re referring to revenue?