Investments, News

Dell goes private in a $25 Billion leveraged buyout, new focus includes cloud and mobile

dell-logoMichael Dell’s 7- month long effort to make Dell private proved fruitful today. With help from private equity firm Silver Lake Partners, Dell ends its 25-year tenure as a public company in a $25 Billion deal with the shareholders

The decision to go private was announced in a press report earlier this year. It received a great opposition from it’s activist investor Carl Icahn. According to Icahn this joint bid between Dell and Silver Lake undervalues the company. However, he ended this hostility on Monday to allow the transition smoothly. As per a CNBC report, 65% of shareholders’ votes were in favour of the buyout. The shareholders are to receive $13.75 per share and 8 cents per share quarterly dividend.

The reason behind this major change is Michael Dell’s determination to unleash Dell’s potential without the scrutiny, quarterly targets and other limitations of operating as a public company. He wants to bring back the entrepreneurial spirit that made the company initially. “As a private enterprise, with a strong private-equity partner, we’ll serve our customers with a single-minded purpose and drive the innovations that will help them achieve their goals,”  says Dell.

Dell’s quarterly revenue fell by 72%, it is facing a stiff competition from other PC makers who are now developing smartphones and tablets because the market’s spending is shifting away from desktops and laptops, like those manufactured by Dell. According to Morningstar analyst Carr Lanphier, “Dell’s servers and networking and enhanced services sales grew 35% in the past five years, offsetting a $2 billion decline in PC and mobility sales.” Hence, now Dell’s focus would be on cloud computing, mobile devices and data centre machines.

The company is now going to be involved with higher margin businesses and give technology solutions to them. Also providing the companies with services and softwares and not just low price PCs and servers. By this move, Dell is now going to compete with competent players in this particularly industry namely IBM Corp., Cisco Systems Inc. and HP Co.

Michael Dell founded the company in 1984 in a college dorm room, at the age of 19. He plans on closing the transaction by 1st November, which will make him own 75% of the company.

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