Feb 5 - Combining with another hardware company, snapping up smaller component makers, or exiting the PC business altogether are some of Dell's not so secret options as the company goes private in $24.4 billion deal with help from Microsoft and private equity firm Silver Lake. Conway G. Gittens reports.
Dell's $24.4 billion deal to go private is the biggest leveraged buyout since the recent financial crisis. It's being financed by equity and cash from the company's founder Michael Dell, cash from private equity firm Silver Lake, a $2 billion loan from Microsoft and debt financing from four banks. Investors get a 24-percent premium from where the stock was trading before the deal was announced. By taking the company private, Michael Dell won't have to answer to public shareholders as he figures out what's next. The world's No. 3 personal computer maker is grappling with an industry-wide slump, says Jon Marino, editor of Thomson Reuters PEHub. SOUNDBITE: JON MARINO, EDITOR, THOMSON REUTERS PEHUB (ENGLISH) SAYING: "They are going to have opportunities to sell parts of the business that aren't working out, make layoffs that maybe would've been a little more difficult and a little more public as public company and also on top of that, they are going to able to continue to make developments with Microsoft. Microsoft is obviously a developer. I wouldn't expect to see a tablet that says Dell on it anytime in the future, but they can move their parts within Microsoft's product and that's going to be an important level of collaboration for these two huge and mature companies." That strategy is only going to go but so far in addressing Dell's key problem - consumers dumping PCs in favor of tablets. SOUNDBITE: JON MARINO, EDITOR, THOMSON REUTERS PEHUB (ENGLISH) SAYING: "It seems to me like the game plan for Dell is to ultimately sell the company to another big tech maker. It remains to be seen whether the PC business is going to be as competitive as it currently is. So maybe we could see another private equity firm even buy a part of HP (Hewlett-Packard), like its desktop business - stay away from those printers you don't want to be there - and you can merge those two companies together eventually. It is going to be pretty interesting to see us maybe consolidate the laptop business into maybe just two or three players. Apple obviously isn't going away." The company could do both. It could make small acquisitions of component companies to reposition itself. It could then merge or be sold-off. Dell could also go the way of IBM, dropping out of the PC business altogether, turning to corporate information technology and services.