Dell in talks over private equity buyout

By Graeme Burton
15 Jan 2013 View Comments
Michael Dell sitting

Dell, the world's third-biggest PC vendor, is in talks that could see it taken over by private equity, according to reports.

However, discussions with TPG Capital and Silver Lake are currently at a preliminary stage and financing has not been secured, according to the Bloomberg newswire.

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The company has lost 40 per cent of its value over the past year as it has lost market share in the PC sector, which remains its prime revenue earner, to Lenovo. The China-based vendor has been accused of buying market share at the expense of profit margins, a strategy that could affect the company should a downturn in sales leave it with excess inventory.

Dell, in contrast, is seeking to focus more on higher-margin products, and services in particular after losing its briefly held position as the world's biggest PC vendor in 2006.

The company's stock soared by 13 per cent on rumours of a potential deal. However, the cost of such a deal - the company was valued at $19bn (£11.8bn) before the deal was revealed - would leave Dell burdened by a high debt, at a time when its main PC market is under pressure from alternative devices. The launch of the Windows 8 operating system, meanwhile, has failed to stimulate new PC sales.

Company founder Michael Dell has, in the past, admitted considering taking the company private himself in order to execute a transformation of his company. Michael Dell owns 15.7 per cent of the company and has a net worth estimated at $13.7bn (£8.5bn), but even for him such plans - if they ever amounted to much - floundered on the cost of acquiring the outstanding shares in the company.

 

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