Talk of Dell going private intensifies
Taking the company private could help Dell further its ambitions, writes CIARA O'BRIEN
“For sale: four-door sedan, recent model, low miles. Note: owner’s mother lives in back seat and refuses to leave. All reasonable offers accepted.”
That was the judgment of the Financial Times Lex column yesterday as talk of taking Dell private continued to rise.
Sources claimed that Dell is discussing a leveraged buyout with private equity firms TPG Capital and Silver Lake. A number of banks are said to be interested in financing the deal, with Bank of America Merrill Lynch, Barclays, Credit Suisse and RBC being lined up to provide financing.
Describing Dell as a “solid and serviceable, if unexciting, information technology business”, the FT twisted the knife by pointing out that whoever wants to buy the company will also get a personal computer business, which it says is “in a bad tailspin”.
But the news has lifted shares, which have lost over 40 per cent in the past five years, compared with a 3.8 per cent gain by Standard Poor’s 500 Index.
The company has been hit in recent years by the fall-off in the PC market, as consumers shifted their attention and their buying power to more mobile devices, such as smartphones and tablets.
It has been trying to diversify its business in recent times, moving away from its image as solely a provider of PCs, and become more of an end-to-end provider for firms to help grow clients’ business.
Dell’s new direction is paying off, at least for now. If the rumoured deal is successful, it could be one of the largest since the global recession began.
And the Irish operation has been rebuilding since Dell shut its manufacturing facility in Limerick in January 2009. It now employs more than 2,500 people across three sites, including Dell Software in Cork. Dell Ireland this week said it expects services and solutions that deliver efficiencies, savings and enhanced productivity to remain top priorities for its enterprise customers.
General manager of the Irish operation Dermot O’Connell said he anticipated customers would continue to invest in high-end solutions and services in 2013. He noted that the servers sector of the business was the fastest growing part of Dell’s business. Dell has also invested heavily in services, and opened a cloud RD centre. It is tapping into the trends identified by industry experts.
According to research firm IDC, virtualisation, IT security and cloud computing are among the top three priorities for IT infrastructure investment in the next 12 months for organisations, with almost a quarter expecting to increase spend on IT products and services in the coming year.
Taking the company private could help Dell further its ambitions; analysts have noted that without markets to satisfy, the company may find it easier to invest in acquisitions that help it continue its diversification strategy.