Founder's Syndrome: How Dell Was Beaten at its Own Game
NEW YORK, January 16, 2013
NEW YORK, January 16, 2013 /PRNewswire/ --
After dismal sales due to decline in PC demand and rising tablet sales, the
third largest PC seller DELL looks into going private in a $19 billion buyout,
the largest deal since the recession.
At least four major banks have already lined up to provide financing for Dell
Inc.'s (NASDAQ: DELL) [ Full Research Report ] ^(1) plan to go private,
skyrocketing Dell's stock as high as 13 percent. Buyout firm and deal leader
Silver Lake Partners has tapped the services of Credit Suisse (CS), Bank of
America Merrill Lynch, Barclays, and Royal Bank of Canada (RBC) to finance the
For additional due diligence beyond the scope of this article, read our full
featured research report on Dell Inc. including full detailed breakdown,
technical analysis, analyst ratings and price targets -
absolutely free of charge - available at: [
http://www.nationaltradersassociation.org/r/read_report/d446_DELL ] .
The plan to go private came after dismal revenues and profits posted in Q3 of
fiscal year 2013 despite raking in $13.7 billion in revenues. The number is
down from Q2's $14.5 billion and the $15.5 billion posted in the same period
last year. That also meant a net income of just $475 million for the quarter,
a whopping 47 percent drop from last year's $893 million.
But while its Enterprise Solutions division has been one of the few bright
spots - posting three percent growth year-over-year - it may not be enough to
make up for the huge losses in its consumer division, which is at $65 million
for the quarter.
One large factor was the overall decline in total PC sales during the holiday
season, according to research firm IDC. Shipments were down 6.4 percent at
89.8 million units in the fourth quarter of 2012 compared to the previous
year, surpassing the predicted decline of only 4.4 percent.
Another is the aggressive push of Asian competitors like Taiwan's Acer and
China's Lenovo (LNVGY), with the latter now the biggest seller of PCs after
leapfrogging Hewlett-Packard into first place and pushing Dell to third place.
Ironically, these Asian manufacturers learned the same business model that
Dell itself pioneered. The model is based on extremely efficient supply chain
that helps keep the prices low. Unfortunately for the American firm, the
Asians managed to beat it in its own game.
Since assuming Dell Inc.'s chief executive post in 2007, Michael Dell tried to
revive his company's fortunes by diversifying revenues, spending billions of
dollars on cloud computing and storage businesses. He also made acquisitions
in an attempt to sell more products to businesses due to consumers shunning
PCs in favor of tablets and smartphones.
Going private can accelerate reviving growth and help cope with the
competition without constant scrutiny from public shareholders, according to a
report from Bloomberg. "[Michael Dell] wants to de-emphasize about two-thirds
of his business, and that's a hard strategy to push because it would mean
overall revenue will shrink," an analyst told Bloomberg.
However, previously failed deals involving large leverage buyouts like Dell
have been scarce since the recession. Other tech companies like disk drive
maker Seagate Technology Plc. (STX) have tried going private recently only to
fall through over valuations and financial concerns.
^(1) The Full Research Report on Dell, Inc. - including full detailed
breakdown, analyst ratings and price targets - is available to download free
of charge at: [
Consider National Traders Association
Tired of hearing about the latest, greatest trade opportunity... only to
realize that the ship has long sailed? You need a strong, informative
community in your arsenal. Join the group that has been consistently
identifying momentous situations as they develop -- long before they become
the next top news on major financial networks.
Contact: Contact: Demi Lapierre, Email: press@NationalTradersAssociation.org,
Press spacebar to pause and continue. Press esc to stop.