Print 26 comment(s) - last by TakinYourPoint.. on Jan 16 at 3:14 AM

Dell is in buyout talks with two private-equity firms

In an attempt to one day resurface as a true competitor in the computer technology industry, Dell is looking to go private.

An anonymous source recently told Bloomberg that Dell is in buyout talks with two private-equity firms. The talks are in their earliest stages, so it's unclear if the buyout will go through.

Dell is likely looking to go private because it lost one-third of its value last year alone. PC sales are slow since PC demand can't keep up with that of mobile devices, and Dell has to hear about its financial failures from shareholders each quarter.

Dell's market value was $18.9 billion as of January 11. Its enterprise value is 4.4 times earnings before taxes, depreciation, amortization and interest for the last year, making it a lower valuation than every PC maker bigger than $1 billion with the exception of Hewlett-Packard.

Like some other PC makers, Dell was hoping that Windows 8's release would help boost sales of its hardware. However, Windows 8 device sales haven't been that impressive. While Microsoft happily announced 60 million Windows 8 licenses sold just last week, that doesn't mean Windows 8 devices are flying off the shelves. Dell is still waiting on a sales boost for devices like the Dell XPS 12 convertible tablet.

For the third quarter in 2012, Dell's profit fell 47 percent to 39 cents per share while revenue dropped 11 percent to $13.7 billion from a year previous (Wall Street expected $13.9 billion). Its net income fell from $893 million (49 cents per share) in Q3 2011 to $475 million (27 cents per share) in Q3 2012.

For the same quarter, Dell's PC shipments fell 8.3 percent from a year earlier.

Dell predicts fourth quarter revenue of $14 billion to $14.4 billion, which is a bit less than the $14.5 billion analysts were shooting for. In Q4 2011, revenue was $16 billion.

One good aspect is that Dell's shares increased 13 percent today after news of the possible buyout had spread.

Source: Bloomberg

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By inighthawki on 1/14/2013 9:22:08 PM , Rating: 4
If you don't have a competing product, just give up!

Seriously, why not spend a bit of money and have a competitive product. There's plenty of room for nice tablets in the market. It's shocking how bad a lot of the OEM's products are, and they wonder why they don't do well.

RE: Hmm
By chµck on 1/14/2013 9:30:00 PM , Rating: 2
It's difficult to remedy a damaged brand image, and overpricing their mainstream products doesn't help either.

RE: Hmm
By GoodBytes on 1/14/2013 10:06:52 PM , Rating: 2
No even. 13-14inch laptop with a med range Nvidia or AMD (Radeon) graphic card, IPS panel with a high resolution, high build quality, junk free, ~9h of battery life and it will sell like hot cakes, no mater the price

It's not like this is impossible to do, they used to cram such performance in a 12inch system, and still manages 9h of battery life (Dell XPS 6-7 years ago with the 9-cell battery (of course, without the IPS panel, as that wasn't available in laptop form at the time)).

RE: Hmm
By piroroadkill on 1/15/2013 8:33:12 AM , Rating: 3
Go buy a Sony. They're not even as expensive as you'd think.
Sony E14, 14", 1600x900, Radeon 7670.. blah blah blah..
Just saying, there are options, but yes, they are VERY thin on the ground.

RE: Hmm
By Wolfpup on 1/15/2013 11:07:47 AM , Rating: 2
I kind of feel like HP and Dell have flipped on their mainstream hardware. Like Dell used to offer pretty close to top of the line hardware for reasonable prices, with tons of configuration options. Now their stuff has almost no options, tends to be lower end than HP, etc. while HP is like how Dell used to be.

Only exception are the Alienware systems that are basically like their old high end systems and have lots of options like you'd expect (ugly front grille or not lol).

RE: Hmm
By Nortel on 1/14/2013 10:50:40 PM , Rating: 2
Dell discontinued the Streak 5 on as of August 15, 2011. Customers attempting to purchase the device were directed to a "Good Bye, Streak 5" landing page. The larger Streak 7 was discontinued on December 2, 2011; Dell continues to sell a 10-inch tablet in China.[19]

The Streak was a piece of garbage... I don't think Dell has anywhere near the brain trust to pump out anything decent.

RE: Hmm
By StevoLincolnite on 1/15/2013 2:32:33 AM , Rating: 2
Dell has shown it can still be innovative though.

Case in point, the Dell Inspiron Duo. - Even if it's not perfect and is paired up with only an Intel Atom, it's an interesting form factor.
Just a shame they never released it really outside the USA, may have done well in other countries.

So all is not lost for Dell just yet. :)

Besides, the PC market feels like it's stagnant these days, a 7 year old PC is pretty much what most business's and home users need for only Email, Facebook and word processing which makes up the portion of the market.

Take a look at the Steam hardware survey which would give a good general idea of what gamers are running and about 50% of users are still sitting with a Dual-Core clocked at 2.7ghz or less, 4gb of ram or less and with only 50% of users running Direct X 11 capable hardware.

They need to give a reason for everyone to ditch their old PC's for something new.
Gamers will probably get that excuse when the new consoles launch and most games stop using the ancient Unreal 3 engine and hence push the PC's hardware.

RE: Hmm
By retrospooty on 1/15/2013 9:46:19 AM , Rating: 3
"Dell has shown it can still be innovative though."

Ya, I dont think its that they cant be innovative. Its just the people making product decisions have their heads up their asses. Year after year of "ya but" products. The XPS 13 looks fantastic "ya but" its screen is a low res piece of garbage. Every product they make has a "ya but". Make a nice product and people will buy it. Hell, if that XPS 13 had a higehr res screen and a good one at that, I would be all over it.

RE: Hmm
By stromgald30 on 1/14/2013 10:57:04 PM , Rating: 2
Going private isn't exactly giving up. By going private, they answer to a single, longer-term investor. This removes some of the short-term pressure so that they can make the difficult decision to invest in the future and take some short term loses to become more competitive in the long run.

It's like how some companies go bankrupt, but re-structure and come out stronger. On the surface it sounds bad, but in the grand scheme of things, it's better for the company.

I hope this will allow Dell to turn things around. They've had some flashes of good products, but overall they seem stagnant compared to Asus and other newer entrants. HP and Dell are the last of the old guard of U.S. PC makers, and I think Dell is actually making the smarter move (vs. what HP is doing).

RE: Hmm
By MozeeToby on 1/15/2013 9:50:31 AM , Rating: 2
Here's how "going private" works at least 50% of the time with these firms.

1) Firm buys a controlling interest in Dell
2) Firm replaces board members with people they control
3) New board members hire a 'consulting firm' that just so happens to have connections to (or even just plain is) the private equity firm
4) New board takes out loans against company capital to continue paying 'consulting firm' despite no changes being made
5a) In the unlikely event that Dell manages to turn things around, private equity firm gets rich!
5b) In the far more likely event that Dell ends up bankrupt, private equity firm gets rich! (And the banks that offered Dell loans in the first place get the shaft).

RE: Hmm
By 91TTZ on 1/15/2013 1:43:39 PM , Rating: 5
I think you misunderstand what's going on here.

There are downsides to being a public company. You're at the mercy of the mob. Investors generally want a quick return on investment and as a result they'll apply pressure to do things are bad for the company in the long run. For them, it's all about flipping a company. You have to answer to investors who are just looking to make a quick buck.

For example, have you ever wondered why so many publicly traded companies do things that give them a short term gain in exchange for a long term loss? You might think "why would they ever outsource production to China, sell off their factories, license their name for others to use (thereby diluting the brand) and then sell off pieces of the company until it's gone?" Because it's profitable to do in the short term and investors push them to do it.

Right now, you have all these companies falling for the cell phone/tablet craze. It will be short lived. Everyone is saying that tablets are the future of computing. A few years ago everyone was saying that netbooks were the future of computing, and a few years before that laptops were supposed to be the future of computing. There will always be a market for these devices but the average selling prices are falling quickly and the profit margins are getting slimmer. Remember, the craze isn't about customer demand, it's about corporate profit. There's a huge customer demand for toilet paper, also, it's just not a product that has a high profit margin.

Desktops were the future when they commanded a high profit margin. The profit margin dried up on them so they proclaimed laptops to be the future. The profit margin dried up on them so they proclaimed netbooks to be the future. The profit margin dried up on them so they proclaimed tablets to be the future. And now the profit is drying up on them too.

The truth is that computing is becoming more mature and the industry is running out of new frontiers. People don't need to replace their computers every few years anymore. Once all tablets are under $200 and have HD displays and fast CPUs there won't be a need to upgrade them until they break. Companies are going to have to shrink a bit since consumers aren't going to be spending the money on computers that they used to.

Dell makes ugly stuff
By tayb on 1/14/2013 9:47:11 PM , Rating: 3
Simple as that. The Dell XPS 13 doesn't look half bad but Dell has such horrible brand image that people aren't buying anyway. Performance has reached a plateau of sorts. Make your devices look nice or watch them sit on the shelves.

Also, where is the Dell Android or Windows phone? Smartphones are highly profitable but I couldn't buy a Dell phone even if I wanted to.

Inept management. And the employees will be the ones who eventually pay the price.

RE: Dell makes ugly stuff
By GoodBytes on 1/14/2013 10:11:29 PM , Rating: 2
I agree, however:

@Dell XPS 13:
-> Screen is awful
-> Screen uses Windows 8 minimum supported resolution while a few years ago, we had much higher resolutions at that size of laptop.
-> Keyboard is awful
-> not replaceable battery (HP does an ultra book in their business line system with a replaceable battery).
-> Not Windows 8 ready, despite being a brand new laptop. Clearly this was on their shelves for years, and now decided to release it.

RE: Dell makes ugly stuff
By menting on 1/15/2013 9:58:38 AM , Rating: 2
I'm one of the rare that has a Dell phone (Dell Streak 5), and the hardware is fantastic, but the software support was crap. The biggest problem was that rarely anyone knew it even existed.

RE: Dell makes ugly stuff
By TakinYourPoints on 1/16/2013 3:14:39 AM , Rating: 2
Using good components would certainly help. Instead they're shipping laptops with trash displays, garbage keyboards, and awful trackpads. Apple and Lenovo are the only companies these days shipping anything with decent user-facing components, and even then you have to pay Apple-level prices on the Lenovo hardware to match up. The other big exception is the Asus Zenbook Prime, and again, you're paying for that quality.

The problem with Dell and so many other OEMs is that even when you pay up, they still fall short with those things.

The only place where quality consistently comes through are their high end desktop monitors, but they had better at a grand+ a pop.

By Tony Swash on 1/15/13, Rating: 0
RE: Schadenfreude
By retrospooty on 1/15/2013 1:19:54 PM , Rating: 2
Tony Swash: "Apple Apple Apple, Apple Apple Apple, Apple Apple Apple"

Seriously man, you are like the ham-burglar.

So, tony, how are you today ?

Tony: "Apple Apple Apple"

Really? No, I mean how are YOU doing?

Tony: "Apple Apple Apple"

Seriously Tony, this has nothing to do with Apple

Tony: "Apple Apple Apple"

RE: Schadenfreude
By spread on 1/15/2013 2:17:12 PM , Rating: 3
you are like the ham-burglar

You mean turd burglar.

Bad Support Cost Dell
By NauticalStrong on 1/14/2013 10:09:24 PM , Rating: 2
When Dell made the decision to outsource their US customer support overseas they blew it and seriously started sending customers to their competitors. Dell had good support prior to that but could never get the support quality where it needed to be when they made the change.

RE: Bad Support Cost Dell
By GoodBytes on 1/14/2013 10:13:55 PM , Rating: 2
Every manufacture has the same quality of service, or worse than Dell Home.

Order your laptops or desktop by calling Dell Small Business (you don't need to be a business, yes you can order just 1), You pay a bit more (see Small Business section on the website) for most systems, but the after sale service is much better.

Running themselves into the ground
By CZroe on 1/14/2013 9:43:40 PM , Rating: 3
Buying up Alienware and then not showing a thing at this year's CES was a genius move. *rollseyes*

I was seriously hoping for an M12x.

JIT process no longer good enough....
By rdhood on 1/15/2013 9:50:30 AM , Rating: 1
Dells claim to fame was the ability to tweak their manufacturing and assembly to wring out a profit. That was an advantage for a very long time. No more.

We have been saying for years that PCs/notebooks are commodity products. Well, so is the phone. Apple's bottom line is just about to realize that. Tablets will not be far behind. For Dell, though, all of this means very rough times ahead. They showed the world how to build at the lowest possible cost, and now everyone can do it as well/better than they can. They needed to start diversifying their product/service offerings at their peak of popularity (remember this? your getting a Dell, dude). Now is too late.

By 91TTZ on 1/15/2013 1:46:12 PM , Rating: 2
We have been saying for years that PCs/notebooks are commodity products. Well, so is the phone. Apple's bottom line is just about to realize that. Tablets will not be far behind.


By btc909 on 1/15/2013 12:34:28 AM , Rating: 2
Going public was stupid. The personal service has been gone for decades. The XPS 12 is great, but you left out an SD card reader, WTF & the price is firmly in Apple territory. Jumping into the smartphone market was a waste. I think having three business lines of computers Vostro, OptiPlex, & Precision was a bad move. Just stick with the latter two lines. Ok I have to admit I buy Vostro 470's all of the time. Windows 7 Pro upgraded to 32GB of RAM runs quite well. Throw in a SSD as well. The electronics selection is laughable. The monitors are still fantastic but the price just keeps going up & up. Having a very limited selection of Windows 7 computers is a bad move. I have no love for Vista 8. Putting 5400RPM Hard Drives in laptops is a mistake, it makes them run like slugs which will give the end user a bad rap of your brand.

Dell has crabs
By Shadowmaster625 on 1/15/2013 9:03:27 AM , Rating: 2
Maybe if Dell and Intel spent more time innovating and less time in bed together conspiring to crush competition, they would have compelling products today.

Some work needed here
By Taft12 on 1/15/2013 4:01:58 PM , Rating: 2
A very newsworthy post Tiffany, but can we please run these through an editor next time?

Its enterprise value is 4.4 times earnings before taxes, depreciation, amortization and interest for the last year, making it a lower valuation than every PC maker bigger than $1 billion with the exception of Hewlett-Packard.

Who are the PC makers bigger than $1B? Why list only the exception? This sentence is maddening!

“Then they pop up and say ‘Hello, surprise! Give us your money or we will shut you down!' Screw them. Seriously, screw them. You can quote me on that.” -- Newegg Chief Legal Officer Lee Cheng referencing patent trolls

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