Dell does go private – but why?
IT’S been announced that Michael Dell is going to buy back his company and take it private. The buyout price is $13.65 a share for a total just north of $24 billion. The big questions is: why?
Clearly, the obvious answer is that they think the company is worth more than the stock market thinks the company is worth. That’s why you buy things: because other people value them at a lower price than you do. But why do they think this?
The company has problems. Basically, we’ve reached peak PC. Desktop computers is now a declining market and there’s just not a lot of money in it. So Dell has been trying to do a switch, to move over to being a systems integration company (for which read, installing all the software to make whole systems work, not just supplying the boxes).
And the thing is the market isn’t really sure that they’re going to be successful doing that. There’s no particular reason to think they will be either. The skills required to mail order retail PC boxes and those required to hook up large company networks are just not the same.
Dell and his new investors obviously think they will be successful. Thus they think the company is worth more than the market does.
Good luck to them too but I’m not sure that I buy the story.