Dell, an American multinational computer technology service which is providing its services since more than 28 years. But since early 2013, it has gained a significant media attention. It finally seems to be happening exactly what was assumed few months ago that Dell would go private with $24.4 billion bailout by its founder Michael dell and private equity firm Silver Lake.
How it all Started?
According to an early news story in 2013, Michael Dell was trying to seek majority control of Dell, .inc in a buyout. The idea was to go private in order to shift the company’s focus from PC sales to a more enterprise focused company. The company, while understanding the market shift was trying to focus on manufacturing tablet and cloud computing rather than being a niche PC maker. Not only that, this would also keep Dell from any kind of Wall Street scrutiny.
For the shares that were being traded at $11, prior to this management buyout news, Michael offered a price of $13.65 per share. The buyers in this deal were Michael Dell, Silver lake partners and Microsoft.
Later in March, Private equity group ‘Blackstone’ and corporate investor Carl Icahn showed their interest in investing in the famous, yet struggling, computer maker Dell, which put serious pressure on its founder- Michael Dell. The much unexpected bid by two famous investors puts Dell’s future into questions. If successfully invested by these companies, the buyout process could threaten the future of Michael Dell, who invented the company at the age of 19.
Under Silver lake plan, where Dell was offering a share price of $13.65 per share, several high profile shareholders like Southeastern Asset Management and T. Rowe Price said that Dell is undermining the value of the company – resulting into rival bids by billionaire investor Icahn and Blackstone. Where Blackstone offered to pay over $14.25 per share to win the interest of shareholders, Icahn offered a price of $15 per share. Icahn was willing to win 58 percent of Dell’s stock.
A day after when both investors made their separate bids, Ichan proposed to partner with Blackstone and thus made the game slipping away from the hands of Michael Dell even more. The move was likely to make it easier for rival investors to overtake Michael’s $24.4 billion buyout bid for the company.
But still recently, Blackstone reportedly withdrew its bid for Dell. The reason behind Blackstone stepping back was quite obvious. Dell’s projected sales for the current year has fallen down to $3bn, down from $3.7bn last year. Following the reports that showed the staggering fall in PC sales and the news of Blackstone stepped back, Icahn also seemed less interested in investing money in Dell. This left Dell with the february offer from Michael dell group’s where they offered to pay $13.65 per share.
Now with Blackstone and Icahn stepping back, what future holds for Dell?
Past few years for one of the most successful PC makers in early 2000s, has not been very bright. In last quarter of FY’12
company’s shares in the Global PC market has slipped to just above 10 percent according to a report by IDC. Another recent report by IDC stated that global PC sales have also declined by 14% in Q1 2013 compared to Q1 2012.
This however has raised another question for Dell. Even if Dell manages to achieve its plan to attain the majority control, at a price of $13.65 per share. Given the recent trend in PC space along with Blackstone’s losing interest, what would be the company’s next step to cover the money it is planning to invest?
Whether or not, the company forays into corporate computing, competing with champions like IBM, its not going to be an easy journey for Dell.
Despite of the poor statistics, Michael Dell believes that he can still change the company’s future by diversifying into other niches that could be profitable for the company. Well, whatever the plans are, if Michael Dell is sure about turning the company into profits, he should not make any delays in the process, as any delay would allow further news flow and more fluctuations in the already ‘shaky condition’ of PC market, which might even lead to Silver Lake withdrawing its bid.