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The Buyout of the Century

September 12th, 2013 - 12:25 pm

It’s official:

Dell shareholders voted on Thursday to approve the computer maker’s $24.9 billion sale to its founder, ending a monthslong slog that included fierce opposition from some investors.

At a brief shareholder meeting at Dell‘s headquarters here, Alex J. Mandl, the head of a special Dell board committee, announced that a majority of shareholders had voted in favor of the sale to Michael S. Dell and the investment firm Silver Lake.

A person briefed on the matter said that roughly 65 percent of the shares that were voted approved the buyout.

The idea is, Dell needs time — time Wall Street won’t allow it — to reinvent itself as a services business. Can they do it, with the founder back at the helm and no demanding shareholders to please?

Michael Dell’s particular genius is actually for warehousing. This is the guy who built warehouses just outside his assembly plant, then charged his suppliers for storing their goods right up until he needed them for assembly. Dell, the company, didn’t take ownership of its computer parts until they left the storage facility Dell built and required its suppliers to use. It’s kind of an evil genius, really. Dell’s, the man, other secret was big volumes/narrow margins, but that’s not much of a secret at all.

Back in the mid-’90s, Dell once boasted — boasted! — that his company spent less than 1% of its revenues on R&D. This was back when Windows had become superior to any of Apple’s offerings, and PC makers could get away with slapping together cheap beige boxes. The original Bondi Blue iMac should have served as a shot across Dell’s (and HP’s and Compaq’s) bow that the times they were a-changin’. The introduction of OS X a few years later and Microsoft’s stumbles and delays getting “Longhorn” out the door should have re-sent the message louder and clearer. Longhorn of course turned out to be Windows Vista, fer cryin’ out loud.

By that time, Dell’s new Asian manufacturing “partners” were taking Dell’s lunch money.

The New Dell is going to have to move a lot faster, be a lot more imaginative, and sell quality services instead of cheap clones. I’m not sure the old Michael Dell is the man to do all that. So it seems smart for the company’s shareholders to in essence take the money and run.

I know I would have.

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All Comments   (7)
All Comments   (7)
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Congrats to Hutch [Silverlake Partner]
49 weeks ago
49 weeks ago Link To Comment
The buyout of the 20th century.
49 weeks ago
49 weeks ago Link To Comment

Well, that was a good capsule history. But Dell has a very significant R&D arm, and is a player in the enterprise server market.

In my opinion the relevant question is whether Dell can outrun HP. Sadly for Bill and Dave's legacy I think a tree sloth could outrun HP.

Of course, these days Hewlett's and Packard's true legacy is probably Agilent.
49 weeks ago
49 weeks ago Link To Comment
I agree with the Agilent assessment, as does Wikipedia (so you know it’s true!):

“Agilent Technologies, not HP, retains the direct product legacy of the original company founded in 1939. Agilent's current portfolio of electronic instruments are descended from HP's very earliest products. HP entered the computer business only after its instrumentation competencies were well-established. When Agilent was spun off, items in the Corporate Archives were split-up along product lines, with Agilent retaining almost all of the original HP archives – only where there was duplication of material, was HP given early Test and Measurement material. Both companies retained an original 200A Audio Oscillator.”

Agilent is a good customer of the company I work for, and we are a customer of theirs as well. We usually have a joint project together every few years, and we’ve published some papers together.

Unfortunately, they too are only a shell of what they were even 10 years ago. It’s sad to see it all fade away. But that’s the nature of the beast.
49 weeks ago
49 weeks ago Link To Comment

Sad, but true. I used to use an awful lot of HP/Agilent instruments. Now the only thing I recommend to anyone is their spectrum analyzers. I don't use a lot of Tektronix anymore, either. Lecroy and Yokogawa are eating their lunch in most product lines.
49 weeks ago
49 weeks ago Link To Comment
i generally find it to be a bad idea for me to bet against a self-made billionaire.

your mileage may vary.
49 weeks ago
49 weeks ago Link To Comment
"Past performance is not an indicator of future results."

I bet against Michael Dell when I sold my shares in '98 or '99. Worked out OK.
49 weeks ago
49 weeks ago Link To Comment
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