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Dell Said To Be In Buyout Talks With Private-Equity Firms 150

Posted by samzenpus
from the dude-you're-buying-dell dept.
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.'"
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Dell Said To Be In Buyout Talks With Private-Equity Firms

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  • Lots of people just decided it's a done deal. Well played Dell.. well played
    • by Anonymous Coward

      Fixed that for you:
      Lots of news trading algorithms just decided it's a done deal. Well played Dell.. well played

  • Dude... (Score:2, Funny)

    by Anonymous Coward

    ...you're getting a Dell!

  • by binarylarry (1338699) on Monday January 14, 2013 @05:24PM (#42585605)

    I Hear a cackling that sounds a lot like Steve jobs.

    • Actually from a business perspective, buying Dell might not be a bad idea... basically doing a reverse of what dell did to Alienware... buy it and actually improve the brand, support and image...
      • by mjwx (966435)

        Actually from a business perspective, buying Dell might not be a bad idea... basically doing a reverse of what dell did to Alienware... buy it and actually improve the brand, support and image...

        Just the support would do. Dell still has a huge following in businesses, same with HP simply because they were both geared to provide massive deliveries (try asking Apple to deliver 500 PC's per week for 8 weeks built to your specifications... oh and the first delivery is next week. They'll laugh at you, Dell wont). Apart from that, HP is shite, Dell used to be OK but is heading to shite.

        Dell just has to up it's support offerings and decrease the failure rate.

        Dells best bet would be to kill the expe

  • by ISoldat53 (977164) on Monday January 14, 2013 @05:25PM (#42585611)
    About twenty five years late.
  • Dude! (Score:4, Funny)

    by wcrowe (94389) on Monday January 14, 2013 @05:28PM (#42585637)

    Dude... you're getting redundant!

  • by tuffy (10202) on Monday January 14, 2013 @05:29PM (#42585643) Homepage Journal

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

  • by Bogtha (906264) on Monday January 14, 2013 @05:30PM (#42585651)

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

  • by thoth (7907) on Monday January 14, 2013 @05:30PM (#42585657) Journal

    If they are bought out, Apple fans will likely laugh remembering Dell's famous quote about shutting down Apple.

    If they aren't... their stock surged on speculation of going private... it could plummet if the buyout doesn't happen. Microsoft offered to buy Yahoo in the spring of 2008, was rebuffed, and Yahoo stock took a nosedive. The second buyout offer didn't pan out either, but they didn't take the same beating.

    • Re:Schadenfreude (Score:5, Insightful)

      by vlm (69642) on Monday January 14, 2013 @05:44PM (#42585795)

      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...

      • by Luyseyal (3154)

        Well, they have been expanding in the services realm. Qwest, MessageOne, etc. It's all part of their IBM-ization.

        -l

      • by thoth (7907)

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

        Maybe it gives them more control over their future, doing it on their terms now. Versus an uncertain future when anything might happen, including an even worse outcome due to plummeting stock, loss of confidence, etc.

    • by dfghjk (711126)

      No one who actually remembers the quote would laugh. Only those who perpetuate the fanboy retelling of it would.

  • by ewhac (5844) on Monday January 14, 2013 @05:34PM (#42585695) Homepage Journal
    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.

    • 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.

      Where have you seen this before? I am interested in reading more.

      • Since the 80s.

        http://en.wikipedia.org/wiki/The_Predators'_Ball [wikipedia.org]
        http://en.wikipedia.org/wiki/Barbarians_at_the_gate [wikipedia.org]
        2012 Election coverage of Bain – Mitt Romney’s old stomping ground.

        And I would be careful with the cynicism. Yes, there is room for fraud and most use financial engineering which makes more tax sense then economic sense. However they also do a lot of good. It’s sloppily logic to slap a villain mustache – in particular this case.

        Dell is putting up a large chunk of his money

      • by Anonymous Coward

        He probably just watched Barbarians at the Gate and is now an expert on leverage buyouts.

      • by ewhac (5844)
      • Re: (Score:2, Interesting)

        by h4rr4r (612664)

        Bain Capital.

        This is essentially how they made all their money. Glad our nation dodged that bullet.

        • Re: (Score:2, Flamebait)

          by ChrisMaple (607946)
          You frigging liar. Most of Bain's investments were successful and the companies prospered.One of the huge frauds in the election was the claim that Bain sucked money out of a steel company and left it to fail, when in fact they invested millions into a steel company that had already failed, and kept it afloat for a while. Take off your Obama blinders.
          • by h4rr4r (612664)

            Those companies prospered until the loans and extremely short sighted decisions caught up with them. Look at what they did with those stores. Bain had the chain take out fat loans used those to pay themselves huge consulting fees then sold the real estate under the store and rented it back. Great way to turn an asset into a liability for short term gain. Thus making the short term balance sheet look great, which let them put them back on the market at a huge profit while the chain was nothing but a zombie.

            I

          • PlanetMoney did a show about Bain's investments and highlighted both a success story and a failure story.

            IMHO, Bain made out really well both times, but the problem was that they made out even when the compan(ies) they were buying/merging did really poorly, and Bain made out primarily based on the heavy debt burden they placed on the companies they bought.

            The script seemed to be:

            1) Buy Company -- adding debt
            2) Borrow for acquisitions/mergers -- adding debt
            3) Pay Bain first. A lot.
            4) Add more debt and compa

            • by tehcyder (746570)

              the problem was that they made out even when the compan(ies) they were buying/merging did really poorly

              It's not so much a problem as a fucking business plan.

            • The banks because they weren't traditional S&Ls were selling the majority of the debt onward to the market where it was safely absorbed by pension funds, hedges, and large investors. By safely absorbed I mean for the bank, the market was fucked over hard. This was the running issue of the last two decade when the chickens came home to roost in 2008.

              Bain just needed to show the bank could get a few million for pushing their loans theough to the market while hiding the originators.

              • Ultimately what keeps the music playing is the bankers have a stable of naive lenders who are willing to not notice the obvious in a desperate chase for a couple extra percentage points of interest rate. Why that happens is complex. Sometimes it is because bankers are happy to screw over their clients with bad advice to make their quarterly numbers. Sometimes it is because the lenders are greedy.

                Lending money that allows the owners/management to take their skin out of the game is inherently risky. These

      • Where have you seen this before?

        I can't speak to the forcing of huge loans. For that, you can probably just look at anything Bain Capital has touched. I did look a little into KB Toys and Border's (book store), both of which were shuttered after being more-or-less purchased by private equity firms. In both cases, the company was turning a profit, but the ROI wasn't sufficient for the private equity firm (so-called "vulture capitalists", another term to search for). Being the leading owner but without

    • by ISoldat53 (977164) on Monday January 14, 2013 @05:49PM (#42585845)
      Not coincidentally Dell's previous Co Chairman was once a Bain consultant. Your scenario is just what Bain did repeatedly.
    • Isn't it fun to do that when you're on the private equity firm side? There's no risk whatsoever, and you get nice fat consulting fees and management fees and bonuses.

      Also, typically the management that sold to the private equity firm takes home a nice big paycheck as part of the deal.

    • You missed one more trip to the salad bar. The local municipality will be forced to give large tax breaks and tax abatement programs, sometime it might even issue a bond to do "an infrastructure investment". All that will be used to increase the scrap value of the company when it was dismembered and sold off in pieces.

      The cool thing is, with fox running the chicken coop, every cent of revenue will be given to the new investors, and every cent of liability will be charged to the employees, their pension fu

    • Well that's bleak... just out of interest:

      What happens to the extended (what's the max for Dell? 4 years?) Next-Business-Day warranties you buy today if your described scenario happens in, say, two years...?

      What about the corporate side? If a company buys x hundred Dell rack servers (say R320) today, with y year support contracts, but Dell goes under completely in y-1 years... is the company with the nearly-new servers simply fucked?

      • Pretty much. There is a glimmer of hope that someone buys the company assists, but they usually don't take the warranty liabilities as it isn't profitable.
  • by jeff13 (255285)

    As far as I know, "private equity" firms are companies that restructure companies while borrowing cash to finance said company ... but leaving the company holding the bag on that dept. Should the company fall (now with even more debt and someone else steering the ship) the equity firm gets a big pay off while yet another company goes under.

    Good luck with that. *rolls eyes*

    • Not necessarily. See also the Hostess bankruptcy.

  • I've bought two Dells since my Pentium Pro, not counting my old Alienware, before Dell bought them.

    My most recent two were cheap mid-high range from Best Buy or similar, rather than mail order. Dells on display were now the premium ones, for identical features.

    So...screw 'em. Dell has lost its way.

  • That is the only singular way I can see it will survive. Good? I have no clue.

  • Farewell Dell. I feel sorry for any employees with retirement there.

  • From the inside (Score:4, Insightful)

    by Saint Dharma (1755726) on Monday January 14, 2013 @06:01PM (#42585967) Homepage
    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.
    • Or maybe it's because they just didn't put out very high quality in their established product lines. My 6-man office is filled with Dell laptops (Precision and Latitude, no low-end junk) and it's like working in a freakin wind tunnel...

  • Why couldn't it be HP?

    Dell is still making money. Just not growing. I know I know the shareholders cry liquidate if they do not see results by eveyr single quarter with growth regardless of solid fundalmentals and cash onhand.

    It is rumored IKahn is trying a hostile takeover with HP and with both HP and Dell gone it means big trouble for corporate buyers. Perhaps the unthinkable SamSung and Asus be corporate products?

    Or will it damage the Windows and PC brand more? We keep hearing how PCs are dead and how we

    • by Grishnakh (216268)

      Or will it damage the Windows and PC brand more? We keep hearing how PCs are dead and how we are all dying to do real content creation on single tasking oriented GUIs on tiny tablets (sarcasm intended).

      You say this sarcastically, but it's true. Everyone really is dying to switch over to single-tasking GUIs on tiny tablets. Everywhere you go, people are saying the same thing, that touch UIs and tablets are the way of the future. Even here on Slashdot and other tech forums, all the technophiles are praisin

  • Michael Dell has always swallowed more of Balmer's cock, than would generally be considered comfortable. And Gates's before him. Would new ownership affect this longstanding, gaging, relationship?

  • by M0j0_j0j0 (1250800) on Monday January 14, 2013 @06:24PM (#42586229)

    A Dell - Rolling in the deep.....

  • More than hardware (Score:3, Interesting)

    by dancinfrandsen (1985362) on Monday January 14, 2013 @06:49PM (#42586451)
    Dell's assets include much more than desktops/latops/servers. For instance, a couple years ago they bought SecureWorks, an MSSP that Gartner positions above Verizon, IBM, and Symantec. They have made many other acquisitions in recent years. From the article, Dell has net $5 billion in cash. I don't think Dell as a company is going anywhere, public or private. Maybe they'll pull an IBM and only sell of the PC side of the house.
  • Dude your getting sold!

  • If Dell is going to go down the tubes, who's the replacement?

    We've been very happy with Dell computers over the past 10-15 years. We don't need or use their support, but the computers themselves have been solid and reliable. So - if Dell gets bought out and goes down the tubes - what companies to /.ers recommend for an SME that wants the things to "just work"?

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