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Blackstone Drops Dell Bid, Cites Declining PC Market
An anonymous reader writes "The Blackstone Group has notified Dell's board that it has ended its bid for the company after performing 'due diligence' on Dell's books. The private equity firm gave two reasons for its withdrawal in a letter to the special committee of the board reviewing privatization offers: the 'unprecedented 14 percent market decline in PC volume in the first quarter of 2013' and 'the rapidly eroding financial profile of Dell.' IBM's recently announced intention of withdrawing from the x86 server market may have also spooked investors. Blackstone was one of two outside bidders that emerged after founder Michael Dell and Silver Lake Partners announced a deal to take the company private for $24.4 billion. The remaining bidders did not comment on Blackstone's withdrawal; however, the Bloomberg piece notes that Dell's original deal with Silver Lake Partners contains language preventing the latter from backing out."
I'm a doctor, not an investor.
"No matter where you go, there you are." -- Buckaroo Banzai
Dell just makes computers out of the same Chinese parts that everyone else uses to make computers. They once had an appealing brand, which gave them an advantage over all the other people who were selling an indistinguishable product. But this is not the case anymore. The "we don't care about our exploding capacitors" fiasco has forever tied Dell to an image of a company that cuts corners on quality. Sure, they kept some deals with the corporate and education sector, but my employer is going through hardware upgrades and now we can choose a new Dell or a new iMac. I won't miss you, Dell!
The Blackstone Group has notified Dell's board that it has ended its bid for the company after performing 'due diligence' on Dell's books.
They didn't like what they saw. Dell ran that company very lean and I bet that Blackstone couldn't figure out how to get the returns they want from any investment in that company. And since PC sales growth has stagnated, they couldn't count on expanding revenues and cash flows to support an obscene amount of leverage (ie debt) that these types of firms like to burden takeovers with.
Well Icahn's still in the game, he's claims to offer $15 a share vs Dell's $13.65 per share, I don't like Icahn. He tried to scam Yahoo shareholders (inc me) by claiming a deal was worth more than it actually was.
In the deal, he stripped Yahoo of all it's cash, handing it to shareholders, counted that money (the money we already owned) as money given by the Microsoft deal. He then added a loan from Microsoft which required Yahoo to pay it back with interest back to Microsoft. He counted that loan as income from the deal too. If a company CEO had done it, the SEC would be on him for fraud, but Icahn is a third party asset stripper and he's not obligated to be truthful about the value of a deal.
"Icahn's offer, which was also submitted the day before the deadline expired, includes purchasing $2bn of the firm's shares at $15 per share, and offering $2bn of cash equity financing."
So basically, Icahn is trying to buy only a portion of the shares (company is worth 22 billion), enough to scupper a full buyout. And there's the loan with interest.
He tends to list those as income to pretend an inflated figure on a buyout value. Loans are loans, you pay them back with interest, they're not income, they're not part of a buy price. If the company doesn't need the cash, they're a charge on the company. If the loan on Dell is to pay Icahns buyout, that's a leveraged buyout and its not worth squat to existing shareholders.
Dell shareholders, we Yahoo shareholders had bitter experience of that turd Icahn, you read his numbers very very closely, he tends to flat out lie in the summary about the true value of a deal. He didn't get rich by giving you his money. Classic games to watch out for: buying blocking positions to prevent a buyout, leverage buyout, buying a company by borrowing money against the assets of the company. Third party deals, e.g. agreeing with a competitor some gain if he poisons a company during buyout.
If you don't understand what I mean, look at the Yahoo deal. That would have stripped Yahoo of cash, made it dependant on Microsoft for short term money and made their income also dependant on Microsoft. MS for its part promised to buy a portion of shares in the future at a higher price. The likely block of shares that referred to was Icahns block, I believe that was to be his reward for poisoning Yahoo.
BEWARE!
just buy the model you want from whoever happens to make it. they all source parts from same companies and past performance on not having exploding caps(or other quality issues) is no guarantee whatsoever that the next batch they buy is any better, as shown by dell and others. acer used to have all their hinges break from their laptops for a year, but that again could not be guessed by looking at their models prior and after those.
what I'm trying to say is that brand loyalty is just a recipe for the brand to sell you shit.
I agree about not having "brand loyalty", but disagree about all being the same in terms of quality. In my experience the Lenovo Thinkpads fx are certainly more consistently solidly built and have less issues than other PC laptops. A long time ago Toshiba had a similar thing going for it, but lost it. If Samsung should prove to be able to step up (they are making good attempts in their top end), I'd be happy to switch to Samsung over Lenovo, so not married to Lenovo by any means.
Even as a PC user I admit that same argument can be made for Macbooks, even if they too are just using standard PC components and Chinese production, there is a build quality difference vs the cheapest PCs.
So, obviously, smartphones, tablets, any device which is mobile is going to be more attractve than a desktop PC, for the casual user, since for the most part, it's cheaper and more convenient to get a mobile computing device than it is to get a Desktop PC.
:)
:)
Netbooks and Laptops or even Desktop Replacements will get more popular as they get lower in price and offer way much better battery life.
The Desktop PC won't go away soon, it has its use in business or for the hardcore "PC" gamers. But it will never again be the dominant form of computer usage, those days are gone.
But there is another reason why Desktop PC sales are down.
In the recent years, hardware specs even at the lower end of the spectrum are more than powerful enough to handle the demands of new software, and thus people have less reasons to upgrade. "Remember: if it ain't broke, don't fix it!"
Then you see Microsoft trying to get Windows 8 out there, but it's not working, because Windows 8, isn't flying with people. At this point in time, people who use a PC, don't want to use a PC like a mobile device.
Microsoft would have been better to stick to Windows 7 and keep improving it, adding an optional mobile interface layer and get people to purchase touch screen monitors instead.
They could have built a momentum towards a mobile OS experience, without alienating users.
Oh well
3 years? That's a random and irrelevant restriction to apply.
I chose three years to be the median time between paid upgrades to the Windows OS. Among Windows 95, Windows 98, Windows XP, Windows Vista, and Windows 7, all except Windows XP were replaced about three years in.
Tablets are less hassle for the same functionality a laptop will provide.
Johnny is in a programming class in high school, and he brings homework home, and it happens to be in a language other than Lua or Python. Can he complete his assignment on an iPad?
In addition, many video streaming sites have been known to block users of tablets. Hulu's free tier is PC-only. Amazon video plays on PCs but not on any tablet other than a Kindle or an iPad. Vimeo requires (or required?) the uploader to have a Plus subscription or the videos won't be playable on tablet operating systems. Viewing any other video produces a message to the effect "Click here to remind yourself to watch this video on a computer." I've found that a lot of videos on YouTube are blocked on mobile as well, with a similar message.
There is however much to gain, notably a touch screen
A touch screen gets fingerprints all over the screen, and a capacitive touch screen alone is far coarser than a mouse or even a trackpad. A touch screen with a fine-pointed stylus like some recent Samsung tablets might work, but let me know when the next iPad supports that.
Dim-bulbs will dribble on about Intel's and Microsoft's current profits. The irony is that the doom of the traditional PC marketplace is fully visible within the same. The Intel Tax (no decent CPU unless you spend 200 dollars) and the Microsoft Tax (no per-seat licence for the OS+Office unless you spend a fortune each year) means the entire world is ready for lower cost alternatives, none of which can possibly be provided by a future Intel or Microsoft.
Dell attempted to take the changing market head on by readying the ultimate in thin clients that would do the real work on the cloud. This thin client is a ultra-cheap ARM based product that replaces the traditional PC. Of course, Dell was looking for suckers who would then pay a fortune each year in 'cloud' fees to access traditional PC software remotely. The Microsoft Tax one stage removed still costs the same or more.
Those of us with a memory know the last great change for Dell came when it stopped developing its own proprietary PC hardware, and switched to using pre-made components from the Far-East. The birth of the 'generic' PC. Of course, as Dell grew, it once again reached the point where it could spec its own design of MB and PSU when useful.
The problem with the PC market today is massive over-pricing of key components, especially the Motherboard, CPU, and to a lesser extent the RAM and HDD. Compare the inners of your desktop PC with, say, the Raspberry Pi. Yes, there is a massive performance difference, but mostly because the Pi is based on a poor, obsolete ARM SoC. Switch that part for a quad-core A15, and a tiny card like that is a perfect replacement for the desktop PC used by 99% of people.
ARM tablets using similar tiny computers now have 2GB of pretty fast RAM, a GPU (graphics) powerful enough for everything but mid-end gaming, and 4-cores of CPU power that rival the early 2-core AMD processors that still make XP run acceptably fast today. Remember, the ARM parts can do the Windows 7/Windows 8 like screen acceleration in their sleep.
So where do companies like Dell go? Dell tried the non-PC product market big-time, but always failed to make an impression. Dell produced the world's most popular PDAs, but never built a lasting success. Why? Because like all big PC companies, Dell is predicated on GREED. The idea that the PC market will forever soak its customers with horribly high prices, and thus massive profits. Dell loved its PDAs while they could charge obscene prices for them.
Today, even the cheapest current Android tablets can be plugged into a monitor and mouse, and potentially make for an excellent desktop computer for the majority of users. Today, all that prevents this is a lack of default desktop functionality in Android and Android apps, but this is on the verge of changing. Desktop shells and windows environments are being crafted for Android at an exploding rate. We are only a year away from Android being seen as a desktop replacement for Windows.
What can companies like Dell do in the face of this? Dell needs its relationships with Microsoft and Intel, and the three of them need continuing obscene levels of margins.All they can do is hug each other ever tighter as they fall off the cliff together.
PS the x86 market will continue for years to come, but in a very different way. AMD is producing the model for the future, small efficient Jaguar cores that integrate excellent graphics on the same die, and can provide desktop like PCs using tiny laptop like motherboards. The complete boxed desktop PC, minus HDDs and display, but with integrated RAM, needs to be 150 dollars or less, and only AMD can bring this price-point with enough performance. High-end gaming PCs have got pretty much as fast as they ever will be from a CPU and RAM bandwidth POV, and will represent a declining market in the face of the new consoles from Sony and Microsoft. It is uncertain how long the manufacturing market can continue to support the traditional gaming PC, when the components for such PCs are used by fewer and fewer ordinary computer users.
It's **ONLY** $24 billion.
Control (that magical 51%) is only about $12 billion.
No, you need the full $24bil. If you try and do a piecemeal buyout, the price per share goes up, and so you end up coughing up the full amount anyway. That is why buyout offers are done this way instead.
As far as it being " only" $24bil, the largest kickstarter projects attract less than 100k contributors for an average of $100 each. This would require 1 million contributors for an average of $24k. It just isn't going to happen.
Kickstarter is not nearly as big as people think it is The whole site has only generated a few hundred millions dollars in its entire history. Its an interesting idea, but is not terribly useful beyond a very narrow scope of projects.
I wish I had a good sig, but all the good ones are copyrighted