Tuesday 12 November 2019

Dell must go private if it is to reshape itself for the future

IF we needed evidence as to why Dell should go private, we got it on Tuesday.

The computer manufacturer is subject to an attempted leveraged buyout by its founder Michael Dell and the private-equity firm SilverLight Capital.

The thinking behind the €18bn buyout is that Dell needs to transform its business from a PC manufacturer to a software and services business and that it can only do that if it doesn't have to worry about hitting quarterly earnings targets in the process.

The fourth-quarter results that the company put out were dreadful from top to bottom.

Profits fell by a third, while revenue dipped by 11pc. Perhaps most importantly, the number of PCs it sold across the globe fell by more than a fifth, compared to the last three months of 2011. It is now clear that we have entered the 'post-PC' world and that laptop and desktop sales are in a structural decline.

It was instructive, however, that revenue from Dell's servers and networking sector – the business it wants to concentrate on – grew 18pc.

Mr Dell and Silverlight are facing stiff opposition in their plan to buy out the company. Investors with about 14pc of the stock have come out against the plan so far and are likely holding out for a higher price than the current offer of $13.65 (€10.20) a share.

The likelihood is that the buyout partners will eventually add a little extra to their offer to get the deal done. Dell is a good company, but it needs to get away from the bright lights of the public markets to make necessary changes.

This is as important for the 2,500 Dell staff in Ireland as it is for Mr Dell himself. He should make it happen.

Irish Independent

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