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Dell on the cusp of $23bn deal to go private with Microsoft's help

04 Feb 2013
Dell's inaugural European Storage Forum in London

Dell is closing in on a $23bn deal to leave Wall Street and become a privately held company, according to a report by the Wall Street Journal.

Company founder Michael Dell is set to use $3.7 bn of his own money to complete the transaction. His funds will be bolstered by investment from Microsoft and private-equity firm Silver Lake Partners, along with other investors. 

The deal would see current Dell shareholders receive anywhere from $13.50 to $13.75 per share. Dell shares currently sell for $13.27.

While the deal is still being put together, it has yet to be seen if Dell shareholders would accept the buyout. According to the Wall Street Journal's sources, the deal may appeal to investors concerned about the slump in the PC market.

Recent studies have found that the PC market has lost a great deal of ground to the consumer demand for tablets. According to Gartner, PC sales dropped nearly five percent in the fourth quarter of 2012.

Analysts have told V3 that going private would be a good move for Dell. Principal analyst at research firm Pund-IT Charles King said going private would end the constant scrutiny that Dell has received on Wall Street.

"I'm positively disposed to the idea of Dell going private. The company is well run, profitable and moving forward with what has been a successful reorganisation/refocus on end-to-end business computing," King told V3.

"Despite that, Dell has received more second guessing than love from shareholders and analysts. Going private would allow the company to keep doing what it knows best without worrying about the market's reaction."

Patrick Moorhead, principal analyst at Moor Insights and Strategy, told V3 that he expects Dell to return to Wall Street in three to five years.

"When you look at what Wall Street and the public markets are valuing [Dell] at right now, there isn't a lot of down side to going private," said Moorhead.

"Dell wouldn't remain private, however, and would likely emerge back on the public scene after they have made it through their entire enterprise transition which could take three to five years."

The analysts also say the deal is interesting because of Microsoft's involvement. According to Moorhead, Redmond's involvement is likely to be dependent on certain stipulations which will see Dell work closely with the Windows OS-maker.

"Microsoft is interested in keeping a very focused partner in Dell, and Microsoft's potential investment does just that," continued Moorhead.

"Dell would likely need to commit to certain Microsoft programmes to get the investment, but Dell won't agree to anything that limits their future growth."

Talk of Dell going private has been around since 2010. In November of that year, Dell's chief financial officer said in an interview said that the company had considered going private.

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James Dohnert
About

James is a freelance writer and editor. In addition to ClickZ, his work has appeared in publications like V3, The Commonwealth Club, CachedTech.com, and Shonen Jump magazine. He studied Journalism at Weber State University.

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