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Roundup: Dell unveils buyout to go private in 24.4 bln USD deal
SAN FRANCISCO, Feb 05, 2013 (Xinhua via COMTEX) --
Personal computer maker Dell
on Tuesday announced a 24.4-billion-U.S.-dollar buyout to go
private, which will allow its founder Michael Dell and his
management team to rebuild a company suffering from slumping
sales.
Dell said it has agreed to go private in a buyout led by its
founder and the investment firm Silver Lake. The buyers group will
pay 13.65 dollars a share in cash, making it the biggest leveraged
buyout since the financial crisis.
In a memo to company employees on Tuesday, Dell said the
company's transformation is underway, but "it will take more time,
investment and patience."
The buyout is seen as Dell's most drastic effort to revive the
company, especially after the rise of smartphones and tablet
computers devoured PC sales.
"The implication of going private is that Dell is planning
radical changes to its strategy and product roadmap," Carter
Lusher, chief IT analyst at market research company Ovum, said in
a statement to Xinhua.
Lusher said Dell is in the midst of a wrenching transition from
a supplier of commodity hardware, mainly traditional PCs, to a
supplier of enterprise-grade IT infrastructure.
Dell might come out of this transition stronger with a product
lineup that better meets the needs of businesses and public sector
organizations, but there will be uncertainty as to what products
and services will stay, get strengthened, or get eliminated, he
said.
MICROFOST'S STAKE
Microsoft confirmed on Tuesday it has provided a loan of 2
billion dollars to the buyers group, a move not viewed favorably
by its industry peers. Some analysts said the investment may
strain Microsoft's relationship with its other PC partners. Some
PC makers may wonder why Microsoft, which has already become a
competitor in hardware manufacturing with the launch of its
Surface tablets, would give Dell an advantage by lending it the
loan.
The software giant said in a statement that it is committed to
the long-term success of the entire PC ecosystem and invests
heavily to build the system for the future. Some analysts said
Microsoft may use the loan to maintain Dell's loyalty to its
system, preventing the hardware maker from straying into other
platforms like Google's ChromeOS and Android.
Microsoft's investment in Dell could be like its partnership
with Nokia. In 2011, Microsoft and Nokia entered into a mobile
partnership with Microsoft reportedly paying hundreds of millions
of dollars to secure the deal.
So far, the Finnish handset maker still stays on the Windows
Phone platform while Microsoft has made Nokia Lumia its flagship
Windows Phone, comparable to devices from other smartphone makers.
In a statement to technology news site AllThingsD, Dell noted
that the 2-billion-dollar-loan will not give Microsoft a seat on
its board. "This is a loan and will not have a direct role in day
to day operations of Dell," said the company.
A Bloomberg report, citing people familiar with the
negotiations, said that Microsoft opted for a loan rather than
equity investment to avoid rankling other PC makers that use
Windows.
HP'S OPPORTUNITY
HP, Dell's longtime industry rival, responded to the buyout in
a statement saying Dell's transformation will give it an
opportunity.
"The company faces an extended period of uncertainty and
transition that will not be good for its customers," said HP. "We
believe Dell's customers will now be eager to explore
alternatives, and HP plans to take full advantage of that
opportunity."
"With a significant debt load, Dell's ability to invest in new
products and services will be extremely limited. Leveraged buyouts
tend to leave existing customers and innovation at the curb," HP
noted.
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