PC maker Dell is going private.
A $US24.5 billion deal (a 25% premium on Dell’s recent Nadaq share price) is being financed by founder Michael Dell, private investment company Silver Lake Partners and a $US2 billion loan from Microsoft. Mr Dell is looking for a freer hand as his company diversifies beyond the commoditised PC market. And Microsoft says it just wants to “support the PC ecosystem.” But NBR suspects Microsoft will chip in with a strong opinion: make lots of Windows-based tablets (its own Surface has so far been a slow mover).
Dell shares [NAS:DELL], which enjoyed a 14% run-up to $US13.52 when Bloomberg broke news of the deal January 17, were up 1.17% to $US13.43 in late trading today, valuing the world's third largest PC maker (after HP and China's Lenovo) at $US23.32 billion - a little below the deal price (and well off its $US140 billion high during the dotcom boom).
Dell began in its namesake's college dorm room. The company diversified into areas such as storage, networking and IT services as the PC market slowed, but has faced tough competition in increasingly commoditised markets, and made only tepid moves into the fast growing smartphone and tablet markets. In the third quarter of 2012, Dell's profit slipped 47% against the year-ago quarter to $US475 million on revenue that fell 11% to $US13.7 billion. PC sales accounted for roughly half of revenue.