The much-trailed ‘Dell goes private’ deal has finally been announced. It values Dell at $24.4b or $13.65 per share in cash – c25% ahead of the price before the deal was ‘rumoured’. Dell was once ‘worth’ over $100b. Michael Dell has led the deal, throwing in his 15.7%/$3.8b stake, with backing from Silver Lake and a $2b loan from Microsoft. It’s not a completely ‘done deal’ as shareholders are being given what is termed a ‘go shop’ 45-day period to see if there is a better offer around. We doubt it given they couldn’t count on Michael Dell’s support.
One of the phrases I have often used of late is ‘To be reborn – first you have to die’. Dell was a poster child of the PC age. It/he did a great job – indeed my own company was wall-to-wall Dell 15 years ago. But those ‘on-premise’ days are over. To its credit, Dell has taken steps to ‘reinvent’ itself with services and software. But Dell is still c70% dependent on PC sales. Restructuring in the constant gaze of quarterly reporting is pretty tough. Indeed, making the ‘this will hurt profits for 2+ year’-type of move is almost impossible as a public company. I say ‘almost’ because there are some – IBM is the best example – that have pulled off such transformation. But even they took 10+ years and had a rather deeper/wider base even than Dell.
Whether Dell splits itself, ‘kills/sells’ the PC bit and is reborn as a new age company remains to be seen. But it will be a lot easier to pull off as a private company. Also, remember that Silver Lake has perhaps the best record of any of ‘pulling this kind of thing off – and making themselves and their backers/partners a mint in the process. But this is a big bet even for them.