Dell Said To Be In Buyout Talks With Private-Equity Firms

puddingebola writes "Dell Inc. is reported to be in buyout talks with private equity firms. From the story, 'Dell is discussing going private with at least two firms, said one of the people, who declined to be identified because the talks are private. The discussions are preliminary and could fall apart because the firms may not be able to line up the needed financing or resolve how to exit the investment in the future, the people said.'"

Comments

taking Dell's own advice

[tuffy]

First they give the money back to the shareholders, then they shut the company down.

Why keep it going?

[Bogtha]

I'd shut it down and give the money back to the shareholders.

Re:Why keep it going?

[Anonymous Coward]

October 6, 1997:
"And at the Gartner Symposium and ITxpo97 here today, the CEO of competitor Dell Computer added his voice to the chorus when asked what could be done to fix the Mac maker. His solution was a drastic one.

"What would I do? I'd shut it down and give the money back to the shareholders," Michael Dell said before a crowd of several thousand IT executives. "

http://news.cnet.com/2100-1001-203937.html

Ask Hostess How Well That Worked Out

[ewhac]

We've seen this script before. The private equity firm forces the company to take out huge loans, which are then paid to the equity firm as consulting and management fees, and bonuses. Dell's largest operating cost becomes servicing the debt, which means everything else gets cut -- product research, product quality, staff, salaries. The market quickly realizes that Dell products have become shit(tier), and customers flee.

Four years later, the equity firm is several hundred million dollars richer, Dell goes bankrupt and is liquidated, and thousands of former Dell employees are out of work.

If you were a bank considering a loan to Dell (and not already in collusion with the private equity firm), you should be very very skeptical you will ever see your money again.

Re:Ask Hostess How Well That Worked Out

[ISoldat53]

Not coincidentally Dell's previous Co Chairman was once a Bain consultant. Your scenario is just what Bain did repeatedly.

Re:Schadenfreude

[vlm]

it could plummet if the buyout doesn't happen.

On a long term basis looking at the graph it drops in half semi-permanently each recession, so its about to plummet again anyway.

The question is why do a buyout now at current prices when you're sure to pay less in the future?

As for why go private, if you don't plan to ever expand / require capital ever again, you don't care about access to the stock market to raise capital, you've got to balance long term the costs of the buyout vs the permanent drain on finances of being a public stock, SOX compliance, the various fees, accounting expenses, last but not least idiotic demands from "the market" for exclusively short term (like the next quarter) profitability. I suppose the idea of Dell expanding is kind of unlikely in the near to medium term future. Maybe they have a chance for sales during the Y2036 problem in just 23 more years. Till then if the price drops in half every couple years at each recession...

From the inside

[Saint Dharma]

Up until May of last year, I worked at Dell as a help desk support representative for one of their clients. IMHO, Dell is in trouble because they have stopped innovating. They've put no effort into making a tablet PC that is as good as what any of the competitors offer, and instead of keeping their technical support focused on supporting their products, that have instead decided to diversify and provide support for companies like Boeing who needed help with their infrastructure and were more willing to sack their entire IT department and get it at a cheaper cost. Nothing new here, no sir.