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Dell Going Private In $24.4 Billion Agreement 217

Posted by timothy
from the next-month-back-in-the-old-dorm-room dept.
Nerval's Lobster writes "Dell is going private again, as the result of a $24.4 billion deal involving private-equity investors and Microsoft. The deal will close before the end of the second quarter of Dell's fiscal 2014, according to Reuters. Dell founder and namesake Michael Dell, who owns roughly 14 percent of the company's common shares, will continue to lead the newly privatized venture as Chairman and Chief Executive Officer. He will contribute his existing shares to the new company, on top of a 'substantial' additional cash investment. As with other hardware manufacturers in the space, Dell faces the specter of a softening PC market. And while Dell has made significant efforts to penetrate other markets—including the launch of a private cloud architecture based on the open-source OpenStack—that weakness has affected its bottom line: for its fiscal 2013 third quarter, the company reported an 11 percent decrease in revenue from the previous year; while it enjoyed an increase in revenue from its servers and services businesses, revenue from its Consumer division dipped 23 percent. Its Large Enterprise, Small and Medium Business, and Public revenue also declined." Another take at the New York Times.
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Dell Going Private In $24.4 Billion Agreement

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  • by Anonymous Coward on Tuesday February 05, 2013 @12:39PM (#42797831)

    Give the money back to the shareholders!

    • by malakai (136531) on Tuesday February 05, 2013 @12:44PM (#42797909) Journal

      They are. You are getting all shares cashed in for 13.65 a share.

      • by microcars (708223) on Tuesday February 05, 2013 @01:25PM (#42798561) Homepage
        OP was a joke, referencing Michael Dell's 1997 comment about how he would fix Apple at the time. His response: "Close it down and give the money back to the shareholders"
        • by tgd (2822)

          OP was a joke, referencing Michael Dell's 1997 comment about how he would fix Apple at the time. His response: "Close it down and give the money back to the shareholders"

          If their stock keeps tanking, that may be a good option in 2014, too ...

  • near future (Score:3, Insightful)

    by Anonymous Coward on Tuesday February 05, 2013 @12:45PM (#42797925)

    No Linux support at all...

    Time to support system 76 with my dollars.

    • Which would be nice if System 76 made a 12.1" or 13.3" laptop with an SSD, no optical drive, and a matte finish screen....

      • by marsu_k (701360)
        ...which they don't. Try this [asus.com]. Granted it doesn't come with Linux preinstalled, but in my experience the only thing that doesn't work out of the box is Optimus (for which there is Bumblebee - a hack, yes, but most of the time discrete graphics is not needed). Not affiliated, just liking mine.
      • by poity (465672)

        It's surprising they don't offer a premium ultraportable. Linux users are known to be willing to pay top dollar (look at humble bundle stats), especially the IT professionals who have money to burn, yet they insist on selling consumer level models.

        • by CastrTroy (595695)
          Ultraportables require too much customization for the small market that System76 can reach. If you've ever looked at the innards of the Mac Book Air, you'll notice that just about everything is custom, including, and especially, the battery. Larger laptops just use a bunch of standard cells in a custom plastic covering. But you can't do that with ultraportables because the standard cells are too thick. If they could do it, they'd basically be taking a Lenovo ultrabook, and putting Linux and their own bad
    • by Nerdfest (867930)

      I just picked up one of their machines ... I'm a very happy camper. The "No Windows Tax" is just icing on the cake.

      • Re:near future (Score:5, Insightful)

        by Grishnakh (216268) on Tuesday February 05, 2013 @01:43PM (#42798853)

        I thought the "Windows Tax" wasn't really an issue though: people have complained many times before how Dell would offer a PC with Windows and Linux, and the Linux version would cost more, and it turned out the reason was that, even though the Windows license added to the cost, it was more than made up for by the kickbacks they got from all the crapware pre-loaded. Effectively, the crapware helped subsidized the computer. So if you're just going to wipe the HD and install Linux, a computer subsidized by crapware can be a pretty good deal.

        • by CastrTroy (595695)
          Also, at $659 for their cheapest laptop, it sure feels like there's some kind of tax on there. For the same price you could get a much better machine from any of the other guys (HP, Acer, Toshiba, etc.) Plus they have plenty of selection at lower prices if you don't want to spend as much.
        • by WWJohnBrowningDo (2792397) on Tuesday February 05, 2013 @02:13PM (#42799309)
          This must be some bizarro alternate universe, because I'm thinking to myself: "We need to start porting crapware to Linux".
        • by Nerdfest (867930)

          Dell had a low-end machine with Ubuntu on it around Christmas for $279. The same machine was $329 with Windows, so I'm not sure that's true any more. While it is handy having a proper Windows licence (I run one in a VM sometimes, though the licence probably doesn't officially allow it). Really, I just like to see a company putting out a laptop specifically for Linux and standing behind it for drivers, updates, etc. I'm willing to pay a little extra to make that statement as well. although their prices are n

    • by tgd (2822)

      No Linux support at all...

      Time to support system 76 with my dollars.

      Don't be a moron. Not only is Microsoft not a controlling investor, they're not an investor at all!

      And, of course, if you want to run Linux, a particularly nice option is the single-click install of Linux in an Azure VM... hosted by Microsoft... supported by Microsoft...

      But, sure, a loan from them means no more Linux from Dell.

      • Screw Microsoft and their Azure platform.. I'm working on a project where I'll need a cloud Linux VM. The choice is between an Azure VM, which I signed up for a freeby 90 day eval, and a 1 year freeby AWS tiny instance.. Obviously I was leaning towards AWS, but figured "what the heck, lets see what this Azure platform is all about".. I went ahead and signed up for the 90 day eval.. Set up a CentOS VM, lit it off, planning to load the project code on to, but got buried in honey-doos, and only got back to th

        • by tgd (2822)

          Screw Microsoft and their Azure platform.. I'm working on a project where I'll need a cloud Linux VM. The choice is between an Azure VM, which I signed up for a freeby 90 day eval, and a 1 year freeby AWS tiny instance.. Obviously I was leaning towards AWS, but figured "what the heck, lets see what this Azure platform is all about".. I went ahead and signed up for the 90 day eval.. Set up a CentOS VM, lit it off, planning to load the project code on to, but got buried in honey-doos, and only got back to the VM after about a month, having lost 1/3 of the eval period. After getting most of the honey-doos done, I went back and signed up for an AWS tiny instance, to eval the two side-by-side... A week or so later, still WELL within the 90 days, I get an email from MS telling me I'm getting close to exhausting the resources allocated to the VM and I need to put a credit card on the account to continue.. Mind you, this VM was idle, since I'd yet to get to installing the project I wanted it for... I said "screw MS" and cancelled the account, and went with AWS.. I got a whole year free before I have to start paying for my project...

          Wait, you're saying that your inability to read or do basic math is Microsoft's fault? The free Azure trial specifies the number of compute hours it includes. It doesn't take a rocket scientist (or, frankly, a sixth grader) to divide that number by 24 and see how many days of a VM that covers. (And, by the way, EVERY cloud vendor charges by the hour the VM exists -- they don't care if its idle, suspended, hibernated or anything else.)

      • by whoever57 (658626)

        Don't be a moron. Not only is Microsoft not a controlling investor, they're not an investor at all!

        There are strong connections between the investors in Silver Lake Partners and Microsoft.

  • Good maybe (Score:5, Insightful)

    by Dyinobal (1427207) on Tuesday February 05, 2013 @12:52PM (#42798011)
    Good maybe, they can get back to providing a good service/product for reasonable prices and a modest profit rather than the 100% as much money as possible even at the expense of future profits model that the current corporate culture in the world seems to mandate as the norm.
  • by yeshuawatso (1774190) on Tuesday February 05, 2013 @12:54PM (#42798041) Journal

    Any deal with Microsoft in the title is destined for failure. Just ask Nokia [bgr.com] how that's worked out for them so far.

    • Re: (Score:3, Informative)

      by darjen (879890)

      Really? according to that article, Nokia has turned back into a profitable company.

      • by SmallFurryCreature (593017) on Tuesday February 05, 2013 @03:30PM (#42800351) Journal

        Nokia has stopped with R&D, fired loads of staff and outsourced its production to cheap countries.

        Its strengths were its serious R&D, the loyalty of its staff and its Scandinavian build quality.

        You can ALWAYS turn a profit by slaughtering yourself, organs sell for a lot, just sell them off and you will be RICH! And dead. But RICH!

    • In a 24b deal we are talking about a 2b loan. So, first, it’s small. Second, it’s loan, not equity. So no control.

      (Which I find odd – Why is Microsoft acting like a bank? Maybe if it’s a convertible bond (a bond that can be converted to a pre-set amount of stock) - that would make more sense.)

      • This is an interesting question.

        Could it be that other banks weren't willing to give Dell reasonable rates due to their business performance?

        No idea, but that seems a reasonable assumption.

        • I don’t think it’s strictly access to cash.

          There are plenty of banks / hedge funds that could do the loan – even if the debt was classified as speculative / junk.

          If it were access to cash that would mean Microsoft would be taking on the junior risker part of the debt- which is not the role of a company like Microsoft.

          It could be that they are currying favor with Dell by offering cheap loans (i.e. with nothing legally binding) – but I suspect there is a hook in there that we are missi

      • Second, it’s loan, not equity. So no control.

        Holding a loan can give you influence over the lender, even if it doesn't give the kind of voting rights that equity comes with.

        Why is Microsoft acting like a bank?

        They aren't. They are acting like a company that has an interest in the deal for market reasons beyond being paid back. If they were acting like a bank (and, therefore, basing their lending decision on Dell's creditworthiness and the overall lending market) rather than an interested market p

      • ...and rate on that loan must be bigger than what they'd expect to make via stock.

    • Any deal [wikipedia.org]?
  • by DigitalSorceress (156609) on Tuesday February 05, 2013 @12:55PM (#42798065)

    This could be the best thing for Dell.

    I'm no economist, but the limited exposure I've had to public companies is that nowadays, it's all about ONLY the next quarterly report.

    The way the stock market is pushing things, you can't actually make good long term decisions for your company because the only thing that matters is short term stuff.

    By buying back the stock, they're possibly giving themselves the opportunity to take control back and run the company in the best interests of long-term strategy/goals.

    Good Luck Dell

    • by alen (225700)

      only for the crappy companies with no future like dell

      until a few months ago apple's stock was flying. google is still flying high. amazon is in bubble territory

      • by vlm (69642)

        amazon is in bubble territory

        Yeah man Borders is gonna crush them next quarter. Err. I mean Waldenbooks is gonna crush AMZN. Um... Ah yes B. Dalton will get their customers... whoops

        Seriously other than B+N are there any "large" booksellers left?

        Now I do understand that they, as the main/only player, can crash the whole market, think of Atari in the early 80s. Makes you wonder what'll happen to retail when Walmart bites the dust after destroying all the locals. That would be exciting to watch.

        • by Bill_the_Engineer (772575) on Tuesday February 05, 2013 @01:32PM (#42798691)

          Funny that you mention Walmart (not that I personally like Walmart).

          I think Amazon has a lot to fear from Walmart. Walmart adapts well and I see them competing directly with Amazon online in the near future. Barnes and Noble is doing quite well as a book store which may insulate them from the impending Amazon vs. Walmart price war on consumer goods and electronics.

          • by drinkypoo (153816)

            I think Amazon has a lot to fear from Walmart. Walmart adapts well and I see them competing directly with Amazon online in the near future.

            I don't. Wal-mart sees themselves as guardians of morality. That shit will fly in retail but not on the internet.

        • by nabsltd (1313397)

          amazon is in bubble territory

          Seriously other than B+N are there any "large" booksellers left?

          Although I agree that Amazon isn't anywhere near a problem, I suspect that at this point, books are less than 10% of their sales (in terms of dollars).

        • Yeah man Borders is gonna crush them next quarter

          You can have a viable company and be in bubble range – no inherent contradiction.

          Take a look at the house across the street – before the bubble it was worth 200k – now it’s worth less – but it still has value.

          AMZN is currently at $260 – maybe as a ongoing company it’s only worth $130 with the other $130 based on hopes and dreams of continued growth.

    • by rudy_wayne (414635) on Tuesday February 05, 2013 @01:06PM (#42798219)

      This could be the best thing for Dell.

      I'm no economist, but the limited exposure I've had to public companies is that nowadays, it's all about ONLY the next quarterly report.

      The way the stock market is pushing things, you can't actually make good long term decisions for your company because the only thing that matters is short term stuff.

      This is true, BUT, in this case Dell will be heavily in debt which negates any benefits of going private. Instead of Wall Street demanding an ever increasing stock price, Dell will be under constant pressure from the people who put up $24 Billion and want to see a return on their investment.

      • Re: (Score:3, Informative)

        by Anonymous Coward

        Dell earns $1.2 per share. That's about 10%. Interest rates on debt are not that high and interest payments are tax exempt. So I doubt unless they screw up the business pretty badly they are going to get through just fine.

        Michael Dell and Microsoft are the people putting in most of the money to begin with, and debt holders (banks) cannot put pressure (they are non-voting, by definition, else it would be just preferred stock), so I can't see why this would not work.

        On the other hand Michael Dell wants to

      • by Alomex (148003) on Tuesday February 05, 2013 @01:49PM (#42798929) Homepage

        This is true, BUT, in this case Dell will be heavily in debt which negates any benefits of going private.

        Not really. Most people who finance private takeovers have a much larger time span in mind. While the stock market cares about the next quarter, a typical private investment fund like Onex, Cerberus or even Berkshire-Hathaway (when acting as a lender) has a time span of 5-10 years in mind. As well they usually the have skin in the game, i.e. they just don't issue debt. They actually own part of the company or have warrants for shares.

      • by alexander_686 (957440) on Tuesday February 05, 2013 @04:05PM (#42800827)

        in this case Dell will be heavily in debt which negates any benefits of going private.p>

        The leverage ratio of 4 to 1 (25% equity, 75% debt) is modest. Dell’s earnings are large and stable (though declining) are more than adequate to support the debt. Plus Dell has 11 billion in their savings account, which could be used to pay down the debt.

        Is Dell cranking up the risk? Yes. Into nose-bleed levels? Not even remotely.

    • by Dystopian Rebel (714995) * on Tuesday February 05, 2013 @01:12PM (#42798293) Journal

      > I'm no economist, but

      That's ok, they don't know what they're talking about either.

    • Amen to that. In the DotCom era it seemed like the IPO was the goal. Maybe companies will start to see that sometimes running your business the way you see fit is better without a quarterly report monkey sitting on your back. My only concern is I see that Goldman Sachs was in on the deal, so I'm wondering how much blood they drained from Dell on the way out.

    • by LordNimon (85072)

      This buyout is almost identical to what Freescale went through a few years ago. Almost the same amount ($17B), and the proponents are saying the same exact things (able to focus on the longer term because they won't need to worry about quarter-to-quarter earnings, bla bla).

      It was a disaster for Freescale. They're still trying to dig themselves out of a mountain of debt, and they've been struggling the whole time. Freescale has had significant layoffs, and it's so dismal there that they have a major attri

      • There is one important difference. Freescale was a small fish in a big pond. There were not the biggest nor most efficient in the market. They were fighting a rear guard action. Dell is a big fish in a big pond. Mind you – with other big competitors in a hyper completive environment.

    • I'm no computer historian, but I cannot remember any company that has survived for long dealing intimately with Microsoft. Except IBM, and that was a really close shave.

  • Substitute Michael Dell for Sam Zell, and Dell Company for Tribune Company. Here lies the future...

    Never trust guys with names that end in 'ell'

  • by inode_buddha (576844) on Tuesday February 05, 2013 @01:14PM (#42798345) Journal

    Dude, if you keep buying yourself you're gonna go BLIND!

  • Big gamble... (Score:4, Insightful)

    by erp_consultant (2614861) on Tuesday February 05, 2013 @01:45PM (#42798871)

    Dell - the company and the person - are taking a very big gamble here. The company has been trying, mostly unsuccessfully, for the past several years to get a foothold in the service business. By most measures they have not done very well. Part of that probably stems from their terrible reputation in PC support in the consumer market. Perhaps they feel shackled by the PC business and quarterly reports and Sarbanes-Oxley, etc. And those are valid concerns.

    But...Michael Dell is still going to be in charge. And they are going to have a lot of debt. And PC sales still make up a majority of their profits. In the short term it will probably mean lots of layoffs...particularly for people in the non-service sector of the company.

  • by nimbius (983462) on Tuesday February 05, 2013 @01:59PM (#42799103) Homepage

    anyone think microsoft is taking a step to owning a hardware platform? uefi + comfortable share in a computer manufacturer theyve had lock-in status with for decades anyhow. All thats left is to dab a bit of solder on those CPU pins and theyre apple in a suit.

    • by Joehonkie (665142)
      So add a turtleneck and they just become Apple?
    • by greg1104 (461138)

      At best they're Apple circa 2001, before the iPod. That's not a happy place. Dell already tried a music player [pcworld.com] in 2003 and it didn't go anywhere. Dell has been circling the drain since the .com crash, and its competitors have just been getting leaner and stronger the whole time.

  • by thetoadwarrior (1268702) on Tuesday February 05, 2013 @02:26PM (#42799491) Homepage
    The stock market seems to be full of dick heads and no talent people posing as analysts.
  • MS has a game console and a phone. Maybe now they are going to have their own actual consumer computer? Bet the other hardware retailers are gonna just love that...

  • Dudes, you're getting a Dell (Inc)!
  • Not to flame, but I'm done with them.

    When it comes to big-box, I've been a big + trusted fan of Dell over the decades. They weren't bullet proof, but they were fairly solid. Unfortunately, my last 3 purchases from them have been... well... quite bad. And by bad, I don't mean "the drivers on their support page stunk" but "their choosing of custom hardware has stunk"

    My big Dell tower: had a usb / SD module at the top that was shorting out. Replaced it, still shorting out. I didn't even have to get to Win

    • by Jeng (926980)

      Whenever possible, build your own, you'll be happier in the long term.

      There are of course downsides, my last build I had to send back the powersupply because it would only work for a few minutes (corsair 750HX), and the processor (amd 8 core) because it wouldn't pass stability tests.

  • Their tech support is really good* - they pay attention to who their customers are. And even lately, when q/a seems to be down a bit, they're still good.

    Most of you, you really want self-abuse, call Sun/Oracle "tech support". Maybe you'll get the engineer in Chile, like I did. Or the support for daytime by an engineer who *only* worked third shift.

    As it is, their linux support's excellent, at least now.

                  mark

  • by braeldiil (1349569) on Tuesday February 05, 2013 @07:42PM (#42803187)
    The primary purpose of the deal is to repatriate a bunch of cash without having to pay corporate taxes on it. A lot of the money originally started in the US, but was hidden overseas. This brings it back. The shareholders all get a premium on the share price, giving them their cut. Dell borrows a bunch of money to pay the shareholders, then uses their offshore accounts to pay the banks back, because loan payments are tax-free. And since it's all capital gains, the shareholders are all paying less on it than you pay on your wages. It's how the 1% rolls - good for them, not so much for you.

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