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Dell agrees to be taken private for $24.4 billion

Posted: 06 Feb 2013 ?? ?Print Version ?Bookmark and Share

Keywords:PC? smartphones? tablet? private equity?

Michael Dell built his empire much like how most of the technology giants of our time started theirsas a college undergraduate with big dreams tinkering around in a dorm room at university. Nearly 30 years ago, Dell sold the idea of creating customised, inexpensive personal computers (PC) which eventually landed him in the cover of magazines as a billionaire CEO well before he turned 40.

But that was back in the '80s, which in high technology years is as ancient as it gets. The PC now is being set aside in favour of more mobile and web-ready devices like the ubiquitous smartphones and tablets.

Michael Dell announced Tuesday that he has struck a $24.4 billion deal, $13.65 per share, with investment firm Silver Lake and Microsoft to take his company private, ending its 24-year run on public markets. Dell sees this as a last resort to restore profitability without worrying about his company's Wall Street performance. The deal will be financed with cash and equity from Mr. Dell, a US$2 billion loan from Microsoft and cash from Silver Lake as well as debt financing.

Dell executives reiterated that the company will remain focused in augmenting its software products and services in order to better address the computing requirements of large enterprises. Apart from this, no detailed plan as to how Dell will operate as a private corporation was given. This has led analysts to speculate that Dell might consider selling its PC business. Some note that this is an opportune time for the company to catch up with the rapid industry shift to smartphones, tablets and other high-powered multimedia consumer electronic devices.

Main rival Hewlett Packard was quick to comment in the wake of Dell's announcement claiming the move will not benefit customers. "Dell has a very tough road ahead. The company faces an extended period of uncertainty and transition that will not be good for its customers. And with a significant debt load, Dell's ability to invest in new products and services will be extremely limited. Leveraged buyouts tend to leave existing customers and innovation at the curb. We believe Dell's customers will now be eager to explore alternatives, and HP plans to take full advantage of that opportunity," HP said in a statement.

It seems ironic that HP came out with the news release considering it is on the same boat as Dell, struggling in the tempestuous waters of the PC market. Tech analysts commented that it may not be wise for HP to be calling out Dell's move since its privatisation is backed by Microsoft.

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