The exterior of Dell's offices in Santa Clara, Calif. / Paul Sakuma AP
SAN FRANCISCO -- Michael Dell today forged a $24 billion leveraged buyout of his namesake PC brand, the largest concession to date of competitive woes and PC industry miseries in an industry stricken with Apple envy.
Runaway consumer attention on touch-based computers has sidelined interest in PC makers in recent years, slamming sales of those already lower-margin businesses. Just ask rival Hewlett-Packard.
"I think everybody in the PC business has had Apple envy, and I would imagine Michael Dell would be no different," says Forrester analyst David Johnson.
CEO and founder Dell, who holds 14% of the company, has agreed to plunk down his ownership stake plus cash in the deal, which will keep him as leader. Dell says the transaction "will open an exciting new chapter" for the company.
Dell shares closed at $13.42, up 15 cents or 1.1% today.
The buyout proposition, subject to approval, also promises a potentially lucrative return to founder Dell and new investors. Without the scolding gaze of Wall Street, Dell can institute massive layoffs, slash underperforming businesses and take new leaps into the software, services, mobile, cloud- and data center-based business that promise higher profit margins.
The long-term goal of Dell 2.0 is to rebuild the former made-to-order PC maker in the post-PC era, then do another IPO, says IDC analyst Crawford Del Prete.
For the CEO, a lot is at stake. "Michael Dell and the Dell brand are very closely aligned. He's got a lot of personal equity in that," says Del Prete.
Under the deal, Dell stockholders would receive $13.65 in cash for each share, valuing the proposition at $24.4 billion. The price represents a 25% premium on Dell's closing price on Jan. 11, the day before rumors emerged of it going private.
Private-equity player Silver Lake Partners and MSD Capital will help fund the deal, along with a $2 billion loan from Microsoft and debt financing from Bank of America Merrill Lynch, Barclays, Credit Suisse and RBC Capital Markets. The agreement allows for alternative proposals to be offered.
Highlighting an industry under assault, PC sales worldwide slipped 6.7% in the fourth quarter compared with a year ago, according to preliminary results from Gartner. That downturn comes as tablet sales worldwide grew 75% in the same period, according to early results from researcher IDC.
"They can start experimenting in mobile products," says IDC's Del Prete. "If they get a winner, they can drive that through Dell's market."
Contributing: Roger Yu in McLean, Va.
Copyright 2015 USATODAY.com
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