Dell Inc. (NASD: DELL), the firm responsible for bringing low cost computers into homes around the world are on the verge of doing the unthinkable – going private. The computer giant has saw their share price sag, as consumers shift from traditional pc purchases to the growing tablet and smart phone market. Dell has lost considerably due to this, as they lack a presence in these growing market segments.
A bid to take Dell private by buyout firm Silver Lake and its partners underscores the financing market’s willingness to lend up to $15 billion to the world’s No.3 PC maker — money that could be used to buy back shares and pay dividends even if the deal doesn’t come together. The Silver Lake-led bidding group has lined up debt financing from at least four major banks and is negotiating a final price to pay Dell shareholders, people familiar with the matter have said. Should the buyout talks collapse, Dell could still choose to borrow itself and embark on a large share repurchase, in what investors and analysts refer to as a “Plan B”.
A buyout of Dell, deemed by some financial analysts as unlikely because it would be the largest such buyout since the beginning of the financial crisis and hinder CEO Michel Dell’s ability to do acquisitions, may be closer to completion – assuming Microsoft (NASD: MSFT) gets a say in the company.
Reports Dell was talking with investors about taking the PC maker private surfaced Jan. 14, prompting a 22 percent surge in the shares. The closed up 2 percent, or 21 cents, to $13.25 on the Nasdaq today.
Michael Dell, who founded Dell out of his college dorm room in 1984, retook the CEO job in 2007 after sales faltered. Rivals including Hewlett-Packard and Apple (NASD: AAPL) figured out sooner that computer users wanted stylized notebooks instead of the lost-cost, utilitarian machines Dell was churning out. As part of his turnaround effort, Dell has been buying his way into new markets, acquiring storage, services and software makers to diversify away from the low-profit PCs that make up the majority of the company’s sales. But that progress has been slow, and Dell, which ranks behind HP and Lenovo in PC sales, still gets almost half of its revenue from its desktop and notebook computers. Any deal for Dell will likely come about slowly, given the size and complexity of the proposed deals.
