The personal computer business -? both consumer and business- focused -? which accounts for most of Dell’s revenue will become less of a focus. Assignment: – In 1984, Michael Dell founded Dell Computer Corp.. Dell sales grew from Sims to $man in the first 2 yr. – Dell focused on low cost (often customized) configurations and shook up the whole sector. – In June 1988, Dell goes public selling 3. MN shares @ $8. 5. – With the crash in 2000, Dell cut significantly price thanks to its low inventory ND no R. It gained market share.
It became the top PC-seller with 13% of global sales and grew to 20%. Net Income hits a new high of $3. Ban in 2004. At that time M. Dell step down and Kevin Rollins becomes CEO. By 2006, Net Income falls by almost 30%, share price goes down and in 2007 M. Dell comes back as CEO. – By that time, several trends in the Industry start pressuring Dell’s business model: declining values of customized PC’s, surge In consumer sales in retail channels, PC production from emerging markets, and the rise of smartness. None of Dell’s changes and initiatives works.
In 2005, profits goes down by a 33% and share price by 60%. – In 2008, Dell Initiates a drastic turnaround, moving away from low-margin computers, to higher margined consulting, data management, and software as a service. From “End- user-computing” CUE sale of hardware to “Enterprise Solutions and Services” SEES – consulting data management and software as service. Buy companies for several billions dollars. – In 2012, start considering going private again: MOB (with a Management buy out). At 13. 65 per share. – Once the news becomes official, Blackstone, Carl ICANN get involved.
ICANN offers $12. 0 per share and in addition a chunk of equity expected to earn $0. 50 – $0. 89 of Pre-tax earnings. Assuming a low multiple range of 4. Xx – 6. Xx, that would represent a counter offer to the Dell’s $13. 65 of: (12. 00 + 1. 98) $13. 98 to potentially (12. 00 + 5. 35) $17. 35. 1 . What are the advantages of going private vs.. Staying public? ; Michael Dell argues that the only way to go through the dramatic reorganization and changes was if the firm is private. (1 . Extend Dell’s SEES capabilities 2. Hire lots of sale personnel 3. Expand In ME 4. Invest In PC and tablet markets). Being public, the short-term creased profitability stemming from those Initiatives would be poorly received by the markets. – without dividends and buybacks, he should have enough cash flow to 1 OFF the flexibility to pull off the refinancing act. These are investments that Dell the company couldn’t make while still meeting the quarterly growth targets that public shareholders expect and demand. – One of the largest shareholders (Southeastern Asset Management) argues that none of those reorganization activities requires the company to be private.
The head of Dell’s software unit confirms this statement. ; “… The corporate structure of Dell doesn’t make a difference on how customers interact with our products or how we develop or sell them. ” Dell’s consultant BCC also agrees that “… Many of the take- private’ value levers are applicable to Dell as a public company. * Advantages of being private vs.. Staying public: if you sincerely believe the company has a great upside, then it makes sense to try to benefit from it if you own more of the enterprise.
Michael Dell seems to be eyeing the upside he believes the company will have after the restructuring and probably wants more of it. 2. What are the big strategic challenges? Do you agree/disagree with the proposed solutions? – 1. Will Dell make it in a different market segment (w/strong competition), where it has a limited experience. Limited strategic flexibility. The outlook of the PC business is not promising. – 2. Competing with ME has proven difficult for many western companies. Dell is strong on home ground, competing in ME will require different business model.
The question is at what cost? – 3. Catching up because of a late arrival in the tablet market is not obvious. Potential competitive disadvantage to MEMO brand. – 4. Making the multi-billion dollar acquisition work remains to be seen. Differences in cultures have often proved to be main reason for the big acquisition flops. Agree, as Dell’s market share in the SEES segment is still very small. In the storage segment they have a portion of 7. 2%, Network 1%. Taking Dell private would relief them from a lot of pressure to deliver quarterly results hence they can focus in strengthening in growth areas. . Assess Dell’s board’s performance. Give them a grade. – they don’t seem to have done a lot – seriously overpaid consultants. They did a good work but only pointed out the obvious and put number on paper. In principal, whether those targets are achievable s another story as all the growth areas have already strong market leaders. Not sure what Dell would like to capitalize on? Cisco has biggest market share in Networking, EMCEE and IBM seems market leaders in Storage. The report seems highly inflated.
The reporting was done by 3 different groups which showed inconsistency in their reporting and somewhat confusing. This is evident in the participation process whereby 70 parties expressed interest and only 2 actually submitted intend. 4. Would you put your own money in Dell at Michael Dell’s price–$13. 88? – Why not. M. Dell seems to believe he can turn around the company. Also, Dell is a well recognizable worldwide brand name. I think he is getting a great price to buyback his own company. On the downside, Dell has never worked on something other than PC’S.
Eight months is a long time to stay mum, especially for a tech industry wunderkind, enduring daily bombs from Carl ICANN about his leadership and ethics. (“All would be swell at Dell if Michael and the board bid farewell,” ICANN tweeted at one point. ) So as he strides in front of 350 employees in the glass-enclosed conference room of Dell’s Silicon Valley division a few weeks ago, with celebratory gourmet cupcakes roster with the company’s blue logo nearby, you can literally feel a weight coming off his chest. It’s great to be here and to not have to introduce Carl ICANN to you,” says Dell, the parry prompting laughter and cheers. In Ganja fired Com, SCOFF, layoffs in different departments p. ” Dell Research is divided into four groups: ; Security ; Data Insights ; Mobility and Internet of Things ; Modern Infrastructures Each group has its own chief data scientists. Already the division has delivered a Tech Outlook, which posits the growth and development, at an industry level, of things like:
Insider Threat Research, which looks for a way to help businesses and governments identify the next Edward Snowmen before it happens. Next-Gene Flash Memory technologies like phase-change memory and persistent RAM, all of which could make future flash storage up to 100-times faster than your current mobile storage solution. Smart Algorithms that could predict not Just the weather, but help the company decide in advance how many plows they’ll need and where, exactly, to position them. Data Insights, which takes analytics beyond visualization and predictive analysis to apprehensiveness’s.