To no one’s surprise,
Dell is now a private company.
The shareholder vote was this morning, and the majority voted in favour of Michael Dell and Silver Lake Partners’ $US25 billion bid to take Dell private.
Shareholders will receive $US13.75 per share and a $US0.13 cent dividend on each share. That’s more than Michael Dell’s team initially proposed. A feud with billionaire hedge funder and large Dell stakeholder Carl Icahn made them up the bid.
Dell’s stock has been tanking since 2004, when the PC market became saturated. Now smart phones and tablets are killing the PC market altogether. Dell has spent the past few years investing in its enterprise solutions business. In other words, creating solutions and software for small to mid-size companies. But PC sales still account for nearly half of Dell’s revenue, according to its last earnings report.
Dell is interested in the enterprise space because the margins are higher and it’s too far behind in mobile to catch up. All of its mobile attempts, like the Dell Streak tablet, have flopped. But the enterprise space has stiff competition from companies like Oracle, Cisco and IBM. Dell will have to work hard to earn its keep.
Michael Dell has a true entrepreneurship story. He founded the company in 1984 from his Texas dorm room. He found a way to make the PC supply chain more efficient, and by selling computers directly from the manufacturer, he was able to cut the cost of PCs from thousands of dollars to a few hundred dollars. He’s responsible for bringing home computers to the masses, and it made him a billionaire.
Dell was on top of the world in the early 2000s when it was the number one PC maker. Now it has fallen to number three and while others jumped into mobile, Dell stood still. Michael Dell is widely respected, but he’s never been considered an innovator. Time will tell if has has the chops to reinvent the company. But it’s hard to bet against someone whose legacy is on the line.
Michael Dell plans to keep his current board in place. It will likely need to invest heavily in R&D, make smart acquisitions, and say a prayer if it wants to succeed as a leader in enterprise.