* Putting up cash and equity to take Dell Inc private
* Analysts say he will get more flexibility
* Questions remain over real potential for a turnaround
By Ben Berkowitz
Feb 5 Michael Dell once gave up day-to-day
control of the computer company that bears his name - an
experiment that went poorly and ended relatively quickly. But
now he is putting up some of his own wealth to reverse the
Dell Inc will go private in a $24.4 billion deal
led by Michael Dell and including capital from private equity
firm Silver Lake and a loan from Microsoft Corp, the
parties said on Tuesday.
Michael Dell will put up his equity stake in the company,
plus cash out of pocket and cash from his investment fund. He
will have a majority stake in the company after the deal closes,
according to a source familiar with the transaction.
That the company would go private is not necessarily a new
idea; Michael Dell told an investor conference in June 2010 he
had considered it before.
By pulling the trigger now, the billionaire's company can
focus on reversing its fortunes by concentrating on higher
margin corporate IT and services - borrowing a page from IBM
That is no small task for a company that built its name on
bespoke computers but whose star has waned, and now wants to go
up against larger rivals like Hewlett Packard and IBM.
"This is an opportunity for Michael Dell to be a little more
flexible managing the company. That doesn't take away from the
fact they will have challenges in the PC market like they did
before," said FBN Securities analyst Shebly Seyrafi.
Michael Dell started the company in 1984 out of his college
dorm room with $1,000, and led it to the top of the PC industry.
The TV advertising slogan "Dude, you're getting a Dell" become
one of the best-known catch-phrases of the early 2000s.
The company's early successes made him wealthy enough to
start a business called MSD Capital that employs 80 people in
three cities who invest his money in everything from stocks to
real estate. Forbes ranks him among the world's 50 richest
billionaires, with an estimated fortune of nearly $16 billion.
But much of his success is still tied to the company he
founded, and from which he has not been able to step away.
The first time he handed over the reins was in 2004, when
long-time lieutenant Kevin Rollins took over as CEO. The company
was on top of its game when Rollins stepped in, but sales and
customer service slipped in the ensuing three years, and there
was a general sense of relief among investors when Dell
reasserted control in January 2007.
"There's been no turnaround and the bottom line is Michael
was the one who built the company," Needham & Co analyst Charles
Wolf said at the time.
A STAR IS BORN
In the six years since Michael Dell resumed leadership, the
company's market share has dipped even further, as has its
Dell, which derives more than half its revenue from sales of
plain-vanilla PCs and servers, has steadily ceded market share
to HP and Lenovo, and is struggling along with the
rest of the industry with declining personal computer demand.
Even with the price surge since rumors of a buyout first
broke, Dell Inc shares are still down by roughly half from when
he regained leadership. Though, to be sure, HP's stock has also
fallen about as much.
During that time the market changed dramatically, and Dell's
once-iconic built-to-order PCs have lost favor as consumers and
even businesses move toward tablets and smartphones, a market
where Dell has taken tentative and unsuccessful steps.
That slide was magnified by Michael Dell's brash confidence,
which sometimes got him in trouble with peers, most famously
Apple Inc's late CEO Steve Jobs.
When Jobs returned to lead the company he started in 1997,
Dell famously suggested Jobs would be better off shutting the
company down and returning the cash to shareholders.
Nine years later, Jobs had the last laugh when Apple's
market capitalization surpassed Dell's. Even with its recent
slide, Apple remains more than 20 times bigger than the former
PC industry darling.
With Dell now choosing to go private, much will hinge on the
willingness of future partners to support his potentially costly
turnaround effort. Some support has already been received via a
loan from Microsoft to help fund the deal.
"This gives him flexibility. The market wasn't valuing the
company at where he thinks it should be worth and who knows that
better than him," said Phil Silverman, managing partner at