Dell, mired in the sluggish laptop and desktop business, may have gotten the breathing room it needs Tuesday to remake itself away from the glare of Wall Street — thanks to the company’s billionaire founder and namesake.
The Texas-based firm, which went public in 1988, announced Tuesday that CEO and founder Michael Dell and a group of financiers will purchase the company back from investors in a $24.4 billion deal. At $13.65 a share, the package represents a 25 percent premium above the price shares were trading at in early January, before rumors of the deal first came out. The stock ticked up less than 1 percent to close at $13.42.
It’s the largest deal of its kind since the Great Recession dried up financing for buybacks and other creative financial deals.
“Dell feels like they can’t turn into the kind of company they need to be without getting away from the pressure of having to satisfy the shareholders,” said Stephen Baker, vice president of analysis at NPD Group, based in Port Washington, N.Y. “It’s more likely that they’ll be successful in this path than they would have if they kept going down the path that they were on as a public company.”
Wall Street has been skeptical about the company’s attempts to reinvent itself as a software firm and its attempts to move into the more profitable smartphone and tablet markets.
Analysts say going private will give Dell more flexibility to retool its personal computer business and other lines.
“They can’t give the financial community what it wants while growing the company into what they think it needs to be,” Mr. Baker explained.
Despite the decline of PCs, Dell still has a big stake in the industry. So making a switch away from that would likely mean disappointing earnings reports over the next few quarters, something that investors wouldn’t appreciate, analysts say.
“Dell couldn’t walk away from the volumes and revenues they have in the PC market,” Mr. Baker said.
Going private will help Dell focus on “the next 18 months, rather than the next 18 days,” he said. “As a private company, they can make decisions that aren’t just based on profits and revenues in the next quarter, but with a longer-term focus.”
Mr. Dell, who currently owns about 14 percent of the company’s stock, is teaming up with global technology investment firm Silver Lake to buy back stock. Microsoft will contribute a $2 billion loan in the deal.
“I believe this transaction will open an exciting new chapter for Dell, our customers and team members,” Mr. Dell said in a statement. “We can deliver immediate value to stockholders, while we continue the execution of our long-term strategy and focus on delivering best-in-class solutions to our customers as a private enterprise.”
Mr. Dell created the company as a 19-year-old college student in 1984. The young firm rode the Internet boom in the 1990s as personal computer sales took off. But, like many other top tech companies from the 1990s, it has been losing ground as the industry shifts toward smartphones and tablet computers.
Most experts applaud the decision to go private as a step in the right direction.
“He’s tried to transform the company, but it’s just impossible to do on the public stage,” said Jeff Kagan, an independent technology analyst.
“This is what companies do when they reinvent themselves,” Mr. Kagan added. “They have to do it offstage. If you reinvent onstage, everybody’s a critic and the show will close.”
This move will free Dell to focus on long-term success.
“The markets are changing rapidly, and they don’t have time to do this slowly,” Mr. Baker explained. “They can be quicker and more nimble as a private company.”