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TMCNet:  Roundup: Dell unveils buyout to go private in 24.4 bln USD deal

[February 05, 2013]

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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