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Dell Said To Be In Buyout Talks With Private-Equity Firms

samzenpus posted about 2 years ago | from the dude-you're-buying-dell dept.

Businesses 150

puddingebola writes "Dell Inc. is reported to be in buyout talks with private equity firms. From the story, 'Dell is discussing going private with at least two firms, said one of the people, who declined to be identified because the talks are private. The discussions are preliminary and could fall apart because the firms may not be able to line up the needed financing or resolve how to exit the investment in the future, the people said.'"

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stocks surging! (1)

cod3r_ (2031620) | about 2 years ago | (#42585579)

Lots of people just decided it's a done deal. Well played Dell.. well played

Re:stocks surging! (1)

Anonymous Coward | about 2 years ago | (#42585671)

Fixed that for you:
Lots of news trading algorithms just decided it's a done deal. Well played Dell.. well played

Dude... (2, Funny)

Anonymous Coward | about 2 years ago | (#42585597)

...you're getting a Dell!

whats that sound (5, Funny)

binarylarry (1338699) | about 2 years ago | (#42585605)

I Hear a cackling that sounds a lot like Steve jobs.

Re:whats that sound (2)

aztracker1 (702135) | about 2 years ago | (#42587987)

Actually from a business perspective, buying Dell might not be a bad idea... basically doing a reverse of what dell did to Alienware... buy it and actually improve the brand, support and image...

Finally (2)

ISoldat53 (977164) | about 2 years ago | (#42585611)

About twenty five years late.

Dude! (3, Funny)

wcrowe (94389) | about 2 years ago | (#42585637)

Dude... you're getting redundant!

taking Dell's own advice (5, Funny)

tuffy (10202) | about 2 years ago | (#42585643)

First they give the money back to the shareholders, then they shut the company down.

Re:taking Dell's own advice (-1)

Anonymous Coward | about 2 years ago | (#42587385)

It is pretty funny that Apple's stock is worth 50 times what Dell stock is today.

I can almost hear Jobs muttering something about those damn beige boxes. Were he still alive I'm sure he'd consider today "worth a moment of reflection".

Course, I guess Michael could be really rude and boast that at least he's still alive, but I think it's kinda ironic that a dead man's company is still outperforming his.

Maybe they'll sell of Alienware... (0, Troll)

Anonymous Coward | about 2 years ago | (#42585645)

And then it'll stop being an overpriced joke where the only cool part is that you just paid 500 dollars to get a fancy LED on your case.

Oh wait, what the fuck is cool about that shit?

Re:Maybe they'll sell of Alienware... (1, Troll)

alen (225700) | about 2 years ago | (#42585963)

Alienware was always an overpriced joke

Re:Maybe they'll sell of Alienware... (2, Funny)

Grishnakh (216268) | about 2 years ago | (#42586139)

Alienware is not about paying 500 dollars just for a fancy LED on your case. Don't be ridiculous.

Alienware is about paying 500 dollars for a totally ridiculous-looking case, which includes a bunch of fancy extra LEDs.

Re:Maybe they'll sell of Alienware... (2)

Penguinisto (415985) | about 2 years ago | (#42586237)

And then it'll stop being an overpriced joke where the only cool part is that you just paid 500 dollars to get a fancy LED on your case.

Oh wait, what the fuck is cool about that shit?

Admittedly, it was cool back in 1998 at the LAN parties - but only if you soldered the little bastard on yourself.

Same with the lucite case window, the jerry-rigged liquid cooling system, the LED lights inside, the massive power supply, and the ginormous fan bolted on the side - just to make it look as if your bargain-basement system actually needed the same CFM rating as a Peterbilt radiator fan**.

'course, those days are long-the-hell gone, but I'm man enough to admit that I got into it once. I'll even admit to a twinge of nostalgia when I think about it.

** true story - I bolted an old 12" Amstrad cooling fan onto the side of a case once, just to see my old LAN buddies' eyes pop out. At 110VAC (1/2 the rated voltage), it ran whisper quiet, but having to find an extra plug was a bitch sometimes.

Re:Maybe they'll sell of Alienware... (2)

Billly Gates (198444) | about 2 years ago | (#42586353)

If there is a Microcenter near your town you can build your own for cheap. My exgf was poor and needed a new computer several years ago. I had an older 4 year old system lying around so I took the board and video card out and went to Microcenter and built blue led neon lamps and a wicked looking case for $140 and a PSU.

Little did she know she was running on an older 4 year old system but all she did was type papers and IM friends. You do not need a monster computer anymore unless you run Gentoo :-)

Re:Maybe they'll sell of Alienware... (0)

Anonymous Coward | about 2 years ago | (#42587523)

I run Gentoo on an Intel Atom 330, one of the Nvidia Ion setups (I think Zotac built the board.) One of the best NAS systems I ever built. Has 4gb of RAM, runs at about 30 watts with 3 hard drives, and barely makes any noise.

To be fair, last time I had to rebuild it (I hadn't patched in around 18 months, and wanted to run BTRFS, figured it'd be easier than doing patching) I built it all on my desktop, then just plugged the hard drive in on my NAS box.

Gentoo is great ESPECIALLY on older systems. You just have to have time to setup compile jobs and walk away.

Re:Maybe they'll sell of Alienware... (2)

Kenshin (43036) | about 2 years ago | (#42587933)

I had horrible blue LEDs inside and on the front of the case. I couldn't sleep if I had to download something big. I eventually completely disconnected them.

Re:Maybe they'll sell of Alienware... (1)

aztracker1 (702135) | about 2 years ago | (#42588015)

I still get irked when I see so many cases that are otherwise nice, but have a "window" .... I'm over it for the most part... I'd relly like to see an improved refresh of the Cooler Master WaveMaster case... I'm much more into nicely designed subtle cases... recently leaning to Fractal Design. That said, Dell killed what was nice about alienware, and even their own stuff.

Why keep it going? (4, Funny)

Bogtha (906264) | about 2 years ago | (#42585651)

I'd shut it down and give the money back to the shareholders.

Re:Why keep it going? (0)

Grishnakh (216268) | about 2 years ago | (#42586213)

Don't be silly, Dell isn't that bad. They make some very nice laptop hardware, for instance. I just got an Inspiron, for instance, that's nicer than the Thinkpad I had at my last job.

Here's some companies that really should be shut down and the money returned to shareholders, because either they're being horribly mismanaged or they're complete has-beens (or both): Microsoft, Nokia, Gateway, HP, AOL, Yahoo, Facebook.

Re:Why keep it going? (5, Informative)

Anonymous Coward | about 2 years ago | (#42586291)

October 6, 1997:
"And at the Gartner Symposium and ITxpo97 here today, the CEO of competitor Dell Computer added his voice to the chorus when asked what could be done to fix the Mac maker. His solution was a drastic one.

"What would I do? I'd shut it down and give the money back to the shareholders," Michael Dell said before a crowd of several thousand IT executives. "

http://news.cnet.com/2100-1001-203937.html

Re:Why keep it going? (0)

Anonymous Coward | about 2 years ago | (#42586357)

Any company can be turned around if they have the right strategy and a business plan. Apple at the time was just coming out of a *long* period of mediocrity and came close to the point where shutting down would have been a reasonable suggestion. Dell wasn't at all off-base when he made that comment.

Re:Why keep it going? (0)

Grishnakh (216268) | about 2 years ago | (#42586657)

Yep, basically Apple got really lucky they got a control-freak asshole to take over the reins who was probably the world's greatest salesman. By all rights, they should have gone under. You can't count on that kind of luck when running a company.

Re:Why keep it going? (0)

Anonymous Coward | about 2 years ago | (#42587093)

The combination of timing, Steve Jobs return to the helm, and an infusion of cash from Microsoft via the anti-trust trial settlement agreement allowed Apple Corporation to rise from the ashes. At the outset Dell Computer was a fantastic custom-built computer manufacturer and distributor. I bought an 80286 slim-desktop system from Dell Computer Canada way back sometime in the early 1990s (1990-1991) - the price was better than many of the local business-oriented computer stores and it was an incredibly solid-built system especially the system unit.

Re:Why keep it going? (0)

Anonymous Coward | about 2 years ago | (#42586531)

> I just got an Inspiron, for instance, that's nicer than the Thinkpad I had at my last job.

Baloney. What model ThinkPad is worse than best Insipidon?

Re:Why keep it going? (1)

Grishnakh (216268) | about 2 years ago | (#42586871)

Sorry, I had a brain fart. I meant Latitude, not Inspiron. Latitude E6400 > Thinkpad T510. Both 1-2 years old, not the very latest model.

Re:Why keep it going? (0)

Anonymous Coward | about 2 years ago | (#42587829)

Sorry, I had an e6400 up until this summer at work and while it was serviceable in no way does it stack up to a Thinkpad. I have a T410 of my own and it's in all ways a better machine. To be fair to the Dell the HP that replaced it is worse with its next to useless chiclet keyboard and no pointing device aside from the scratch pad. Just who brought that keyboard abomination to us?

The best Thinkpad keyboard is no IBM Model M but it and its TrackPoint are far superior than anything else I've been given to use. Yes, I'm a keyboard snob.

Re:Why keep it going? (1)

Grishnakh (216268) | about 2 years ago | (#42588093)

I'm a Model M keyboard snob too, but I found the E6400 keyboard just as good as the Thinkpad's (and neither of them all *that* great). I also liked the greater use of aluminum on the Dell, and the simple boxy styling. And, it has the same Trackpoint that the Thinkpad has (but with a bigger and blue rubber top, instead of the smaller red one).

Re:Why keep it going? (1)

crafty.munchkin (1220528) | about 2 years ago | (#42587011)

Hope you got a 3 year warranty with that inspiron, you'll be needing it! ;)

Re:Why keep it going? (1)

pwizard2 (920421) | about 2 years ago | (#42587277)

I haven't used a new Inspiron lately but putting Linux on an Inspiron 1501 (Windows Vista-era laptop) was an absolutely hateful experience. The video card was badly supported (producing vertical lines after closing and reopening the lid) and the fucking Broadcom wireless wouldn't work (even after I installed the firmware) until I configured the startup to modprobe b43 at every boot.

Re:Why keep it going? (1)

theRunicBard (2662581) | about 2 years ago | (#42587419)

Really? What would you say is a good laptop for Linux? I had a Dell E6550 (or something to that tune), tried to put Linux on it, and it worked just fine. I then tried to do the same to my current Samsung Notebook Series 9 and the experience has been horrible. The right click on the touchpad won't work. The brightness couldn't be turned down until a recent update fixed it. And I don't know what it's called but that button on the lower-right of the keyboard that would act as a right-click also didn't work. Even past the Linux issues, the buttons get stuck and and the keyboard imprints on the screen. After this, I would get on my knees and beg Dell for a laptop. The old one is currently at home and chugging along perfectly after four years, despite showing some signs of heating issues.

Re:Why keep it going? (1)

pwizard2 (920421) | about 2 years ago | (#42587835)

I can't recommend a specific current model (my last laptop was bought around 3 years ago) but every time I go computer shopping I bring a live USB stick (containing the newest Linux Mint or Ubuntu of the time) with me. If a computer can't handle the distro on the USB stick w/o minimal issues, I don't buy that model. I shopped like this until I found a HP that had everything (including wireless) work just fine out of the box.

The Inspiron 1501 belonged to a friend (I recently set them up with Linux Mint 14). Since that laptop would have failed my in-store USB stick test I never would have bought it in the first place.

Re:Why keep it going? (1)

rbprbp (2731083) | about 2 years ago | (#42587897)

Don't be silly, Dell isn't that bad. They make some very nice laptop hardware, for instance. I just got an Inspiron, for instance, that's nicer than the Thinkpad I had at my last job.

I have a Dell XPS 15 (the only laptop with a non-1366x768 display I could find here in Brazil - the other choices would be from Apple, whose Brazilian operation is known for overpricing stuff, or gamer stuff which I don't need/want).

Not much to complain about it, really: almost everything worked out-of-the-box on Linux (except for the 'hybrid graphics' bullshit which requires a little hacking to get going, and the card reader - which I don't use that much - which won't automount until you run a command, then it works until the next reboot).

Of course, YMMV, the plural of anecdote isn't data, yada yada yada.

Schadenfreude (2)

thoth (7907) | about 2 years ago | (#42585657)

If they are bought out, Apple fans will likely laugh remembering Dell's famous quote about shutting down Apple.

If they aren't... their stock surged on speculation of going private... it could plummet if the buyout doesn't happen. Microsoft offered to buy Yahoo in the spring of 2008, was rebuffed, and Yahoo stock took a nosedive. The second buyout offer didn't pan out either, but they didn't take the same beating.

Re:Schadenfreude (4, Insightful)

vlm (69642) | about 2 years ago | (#42585795)

it could plummet if the buyout doesn't happen.

On a long term basis looking at the graph it drops in half semi-permanently each recession, so its about to plummet again anyway.

The question is why do a buyout now at current prices when you're sure to pay less in the future?

As for why go private, if you don't plan to ever expand / require capital ever again, you don't care about access to the stock market to raise capital, you've got to balance long term the costs of the buyout vs the permanent drain on finances of being a public stock, SOX compliance, the various fees, accounting expenses, last but not least idiotic demands from "the market" for exclusively short term (like the next quarter) profitability. I suppose the idea of Dell expanding is kind of unlikely in the near to medium term future. Maybe they have a chance for sales during the Y2036 problem in just 23 more years. Till then if the price drops in half every couple years at each recession...

Re:Schadenfreude (1)

Luyseyal (3154) | about 2 years ago | (#42586837)

Well, they have been expanding in the services realm. Qwest, MessageOne, etc. It's all part of their IBM-ization.

-l

Re:Schadenfreude (1)

thoth (7907) | about 2 years ago | (#42586923)

The question is why do a buyout now at current prices when you're sure to pay less in the future?

Maybe it gives them more control over their future, doing it on their terms now. Versus an uncertain future when anything might happen, including an even worse outcome due to plummeting stock, loss of confidence, etc.

Re:Schadenfreude (0)

Anonymous Coward | about 2 years ago | (#42587151)

Maybe Research In Motion can buy Dell Computer Corporation and install QNX on personal and business desktops and servers.

Ask Hostess How Well That Worked Out (5, Interesting)

ewhac (5844) | about 2 years ago | (#42585695)

We've seen this script before. The private equity firm forces the company to take out huge loans, which are then paid to the equity firm as consulting and management fees, and bonuses. Dell's largest operating cost becomes servicing the debt, which means everything else gets cut -- product research, product quality, staff, salaries. The market quickly realizes that Dell products have become shit(tier), and customers flee.

Four years later, the equity firm is several hundred million dollars richer, Dell goes bankrupt and is liquidated, and thousands of former Dell employees are out of work.

If you were a bank considering a loan to Dell (and not already in collusion with the private equity firm), you should be very very skeptical you will ever see your money again.

Re:Ask Hostess How Well That Worked Out (0)

howardd21 (1001567) | about 2 years ago | (#42585765)

We've seen this script before. The private equity firm forces the company to take out huge loans, which are then paid to the equity firm as consulting and management fees, and bonuses. Dell's largest operating cost becomes servicing the debt, which means everything else gets cut -- product research, product quality, staff, salaries. The market quickly realizes that Dell products have become shit(tier), and customers flee.

Four years later, the equity firm is several hundred million dollars richer, Dell goes bankrupt and is liquidated, and thousands of former Dell employees are out of work.

Where have you seen this before? I am interested in reading more.

Re:Ask Hostess How Well That Worked Out (0)

Anonymous Coward | about 2 years ago | (#42585927)

Look up KKR financial. This other MO

Re:Ask Hostess How Well That Worked Out (1)

alexander_686 (957440) | about 2 years ago | (#42586047)

Since the 80s.

http://en.wikipedia.org/wiki/The_Predators'_Ball [wikipedia.org]
http://en.wikipedia.org/wiki/Barbarians_at_the_gate [wikipedia.org]
2012 Election coverage of Bain – Mitt Romney’s old stomping ground.

And I would be careful with the cynicism. Yes, there is room for fraud and most use financial engineering which makes more tax sense then economic sense. However they also do a lot of good. It’s sloppily logic to slap a villain mustache – in particular this case.

Dell is putting up a large chunk of his money – so it probably not driven by short term expectations.

So I think it’s one of two things . First, Dell has insider information – not in the sense of secret numbers – but a feel of the market and the economy – and obviously thinks Dell Inc. is underpriced. Or he has some radical idea for the company and does not want to be slowed down by having to explain things to the shareholders.

Re:Ask Hostess How Well That Worked Out (1)

ewhac (5844) | about 2 years ago | (#42586193)

http://en.wikipedia.org/wiki/The_Predators'_Ball
http://en.wikipedia.org/wiki/Barbarians_at_the_gate [wikipedia.org]
2012 Election coverage of Bain â" Mitt Romneyâ(TM)s old stomping ground.

Also: Storming the Magic Kingdom [amzn.com] . Wonderful book -- informative and engaging. The Walt Disney Company was very nearly destroyed by private equity/LBO vultures.

Re:Ask Hostess How Well That Worked Out (1)

Anonymous Coward | about 2 years ago | (#42586097)

He probably just watched Barbarians at the Gate and is now an expert on leverage buyouts.

Re:Ask Hostess How Well That Worked Out (1, Interesting)

h4rr4r (612664) | about 2 years ago | (#42586209)

Bain Capital.

This is essentially how they made all their money. Glad our nation dodged that bullet.

Re:Ask Hostess How Well That Worked Out (0)

Swampash (1131503) | about 2 years ago | (#42586373)

Where have you seen this before? I am interested in reading more.

See "Bain Capital"

Re:Ask Hostess How Well That Worked Out (0)

Anonymous Coward | about 2 years ago | (#42585769)

Hostess had more problems.

Dell's not in bad shape, it's just bleeding "desktop" market share to Apple. There's nothing wrong with their servers, and arguably their servers are much much better investments than HP or IBM's

That said, should this scenario unfold, what you will probably see is the desktop division get eventually scrapped.

Re:Ask Hostess How Well That Worked Out (0)

Anonymous Coward | about 2 years ago | (#42586101)

> That said, should this scenario unfold, what you will probably see is the desktop division get eventually scrapped.

This.

Desktop computers and laptops are going away. It's not going to happen overnight (it'll be a long and slow progression of decreasing availability and increasing regulation), but it'll happen for several reasons.

1. Most people who use computers use them to consume entertainment (youtube, netflix, hulu, reddit, whathaveyou), give away their personal data (facebook, gmail, flicker, etc.), publish worthless drivel (twitter, various blogs) or communicate (also facebook, gmail, e-mail in general, etc.). You can do all of these things with a tablet. Tablets are cheaper and easier to use for such things. Okay, "easier to use" is arguable. But for the average mouthbreather, tablets are a cheaper, more convenient, more portable choice than a PC or Mac desktop/laptop.
2. We live in a world where computers connected to the internet are used to perpetrate "crimes" that are threatening to the power structures in western society. You have already seen this. Most obvious are the online banking scams and frauds. Computer hackers are demonized. You can get put away for what amounts to changing a number in a computer somewhere. Most recent is the Aaron Swartz case - that should be fresh on everyone's mind. Fundamentally, dude didn't really do anything wrong. Yet he was "guilty" (in the eyes of the establishment) of activities that threaten the system.
3. We already live in a world where battles between nations over energy and resources are fought in cyberspace. Examples: the Chinese theft of American "intellectual property" (whatever that means). Stuxnet, etc. (these are acts of war) perpetrated on Iran over what is fundamentally about energy. The (supposed) middle eastern backlash against western banks. Etc.

In the eyes of the collective system that keeps western civilization moving, the gears turning, the consumers consuming (probably the most important part), the bankers thieving, the wars ongoing, the elections a sham, and the people unthinking, allowing the thinking individuals who hate the system continued access to real computers connected to the internet is just too dangerous. Think of the havoc they can cause!

Prediction: it will be a felony to operate a computer without a license in the United States, before I am dead.

Re:Ask Hostess How Well That Worked Out (5, Informative)

ISoldat53 (977164) | about 2 years ago | (#42585845)

Not coincidentally Dell's previous Co Chairman was once a Bain consultant. Your scenario is just what Bain did repeatedly.

Re:Ask Hostess How Well That Worked Out (1)

Anonymous Coward | about 2 years ago | (#42586713)

You obviously don't know the difference between Bain & Co. and Bain Capital.

Ask Mitt Romney How Well That Worked Out (1, Informative)

dkleinsc (563838) | about 2 years ago | (#42585891)

Isn't it fun to do that when you're on the private equity firm side? There's no risk whatsoever, and you get nice fat consulting fees and management fees and bonuses.

Also, typically the management that sold to the private equity firm takes home a nice big paycheck as part of the deal.

Re:Ask Hostess How Well That Worked Out (0)

Anonymous Coward | about 2 years ago | (#42585895)

One could also argue that Dell has already done most of this at the behest of Wall Street, and perhaps going private is the only way the company can be salvaged after the many brutal touches Wall Street has imposed.

Re:Ask Hostess How Well That Worked Out (0)

Anonymous Coward | about 2 years ago | (#42585931)

You forgot the part where the execs give themselves 300% raises in the middle there.

Re:Ask Hostess How Well That Worked Out (1)

140Mandak262Jamuna (970587) | about 2 years ago | (#42586241)

You missed one more trip to the salad bar. The local municipality will be forced to give large tax breaks and tax abatement programs, sometime it might even issue a bond to do "an infrastructure investment". All that will be used to increase the scrap value of the company when it was dismembered and sold off in pieces.

The cool thing is, with fox running the chicken coop, every cent of revenue will be given to the new investors, and every cent of liability will be charged to the employees, their pension funds, their creditors and the municipality.

Re:Ask Hostess How Well That Worked Out (0)

Anonymous Coward | about 2 years ago | (#42586609)

Tax breaks from the local municipality are only a tiny fraction of the money that these firms often suck out of the government. For example, Mitt Romney was considered a wizard at finding tax loopholes before he started Bain capital, and his reputation for being able to screw the government out of huge amounts of money was a big part of the reason that Bain capital was so successful.

Re:Ask Hostess How Well That Worked Out (1)

Anonymous Coward | about 2 years ago | (#42586681)

So, why don't you put your money where your mouth is and short Dell stock, and the stock of every other company owned by private equity groups? Oh wait, that would be stupid because they are actually more successful than the average company.

Re:Ask Hostess How Well That Worked Out (0)

Anonymous Coward | about 2 years ago | (#42587451)

Are you saying that Dell products can actually become shittier?

Private equity is a scam (1, Interesting)

jeff13 (255285) | about 2 years ago | (#42585727)

As far as I know, "private equity" firms are companies that restructure companies while borrowing cash to finance said company ... but leaving the company holding the bag on that dept. Should the company fall (now with even more debt and someone else steering the ship) the equity firm gets a big pay off while yet another company goes under.

Good luck with that. *rolls eyes*

Re:Private equity is a scam (1)

Billly Gates (198444) | about 2 years ago | (#42586131)

It is a violation of fiduciary duty by the CEO. Can the shareholders sue?

The CEO gets a payout becuase the stock price caused up through the roof as assets go up on the ballance sheet. The CEO pockets a big bonus and a bigger golden parachute and the company then goes bankrupt leaving the shareholders high and dry while the private equity firm sells it for pennys on the dollar with no debt as it is freed by bankruptacy.

Funny, how we are called deadbeats if we did the same thing and can only file a chapter 13 and not a chapter 11 with our own personal bankrupatcies where we MUST PAY BACK.

I just fail how to see how this works as computer programs are the ones that jerk the price up. I think debt should never be an asset but a liability. Do the accountants know something I do not? Logically, if you borrow $1,000 then an equal liability for $1000 should be there as well?

Re:Private equity is a scam (2)

alexander_686 (957440) | about 2 years ago | (#42586273)

I think you are missing an important point – the Private Buyout Firm is the shareholder – they have bought out all of the other shareholders – hence the name.

The shareholder can’t sue themselves – so that’s out. If the firm goes bankrupt – the buyout firm loses their money, etc. (And contrary to popular belief they do have to put up a good chunk of change upfront.) The Buy Out firm wants the company to succeed. (There is a sub-class of Buy Out firms called vulture funds which dismember zombie firms – but that is another story.)

I think you are trying to zero on the fact that buy out firms prefer risker adventures – go big or go home. Bigger rewards but a bigger chance that one of the firms that purchased will go bankrupt.

Re:Private equity is a scam (1)

mattack2 (1165421) | about 2 years ago | (#42586367)

I admit I should probably know this, but what is the exact mechanism when a buyout happens?

In other words, how do they force other shareholders to sell? (Why can't someone hold onto their stock and be the equivalent of the stereotypical one homeowner who refused to sell so now there's a giant building AROUND their tiny little house.)

I presume it's: >50% of shares are owned by one entity, they get a new board, and somehow the board authorizes a buyout by X company. But I still don't know what the method of the forced stock purchase is.

Re:Private equity is a scam (2)

alexander_686 (957440) | about 2 years ago | (#42586815)

A takeover or merger works when company A offers to buy company B. Company A can offer some combination of stock in the new company, cash, or debt (less popular now). Company B then decides to take the deal or not.

So, let’s be specific. Private Equity firms tend not to have stock so they tend to offer cash. Dell is currently trading at $12.50 so they would offer more – let’s say $15 to $20 per share. The Dell Board has 3 options.

First, they can accept the bid. All of the old shareholders hand over their shares for cash. The second option is to refuse the offer. There are a lot of reasons to reject an offer. However, if the Buy Out firm is offering a cash price higher than the current stock price it would be hard to resist – bird in hand vs. 2 in the bush type of logic. Or the board could try to find a different suitor.

The trick is that the board must consider everybody’s position. The CEO / founding family / majority shareholder can’t squash a deal just because they would lose control. In this way the minority shareholder’s rights are protected.

As an aside, as to somebody trying to get a 50% share of the company – that is frowned upon. If one can gain effective control of a firm, the effective value of your shares go up and the real value of the minority shareholders go down. Many countries have rules that if you get effective control of a firm you have to put forward an offer for the whole firm.

Re:Private equity is a scam (1)

alexander_686 (957440) | about 2 years ago | (#42586915)

One more point - you mentioned the “stereotypical one homeowner who refused to sell so now there's a giant building AROUND their tiny little house”. In this case you don’t own the house – you own a share of a house. Do you want to be trapped in that house?

I knew a family that owned a 1/64 share of a vacation home left to them by their grandparents. They had moved to the other cost. Scheduling was a headache – all 8 families wanted it in the summer. They had to pay 1/64 of the property taxes. They had to pay 1/64 of the repairs when the boyfriends of the 2nd cousins they had never meet had a college beer party in which they managed to sink the ski boat. etc.

There was a certain amount of infighting among the relatives. The richer folks who had moved away wanted to sell the place. The poor relatives nearby wanted to keep the place – but could not afford to but out those who wanted to sell.

So they sold the place and split the cash. It may not have been the best solution but it was a fair solution.

Re:Private equity is a scam (1)

Sique (173459) | about 2 years ago | (#42586987)

They have to convince enough shareholders to sell. If they manage to get a majority of shares, they can replace the board of directors, and then they can change the direction of the company so other shareholders will sell out too. And if they then get a very big majority of shares, they can squeeze out the remaining shareholders (the actual cap depends on the legislation, but it is about 95%).

Re:Private equity is a scam (1)

mattack2 (1165421) | about 2 years ago | (#42587051)

OK thanks, that answers the specific question -- there is a specific percentage of share owners that they can get to agree to the buyout after which the rest are forced to sell. (Or rather, I guess one's broker literally just sells for you. If you had paper shares? That seems unlikely nowadays.)

I thought that was likely the case, but I didn't know the exact mechanism.

Re:Private equity is a scam (1)

alexander_686 (957440) | about 2 years ago | (#42587237)

It can happen one of the 2 ways.

First, the board could make a decision. The majority shareholders can’t block this. This is to prevent the majority shareholders screwing the minority shareholders. This normally happens in a cash merger. Stock is trading at $12.5 – we have an offer of $20 – not much of a decision.

Sometimes it’s a shareholder referendum. In this case the majority wins. This is when things are close – normally in a merger. Do I want to swap my 1 Compaq share for 0.6325 share of a Hewlett-Packard?

Re:Private equity is a scam (0)

Anonymous Coward | about 2 years ago | (#42587477)

(Why can't someone hold onto their stock and be the equivalent of the stereotypical one homeowner who refused to sell so now there's a giant building AROUND their tiny little house.)

They don't give you the option. y mom had stock in Cooper Industries that she had all but forgotten about, then they got bought out by Gardner Denver, they cut her a check for the value they had placed on the stock and nullified the stock she held.

Re:Private equity is a scam (0)

Anonymous Coward | about 2 years ago | (#42586279)

If it goes private, there are no shareholders.

Re:Private equity is a scam (2)

lord_mike (567148) | about 2 years ago | (#42587761)

Incorrect. Unless it reforms as a partnership, there will be shareholders. The shares simply won't be traded publicly.

Re:Private equity is a scam (1)

Alex Zepeda (10955) | about 2 years ago | (#42586365)

Not necessarily. See also the Hostess bankruptcy.

Private Equity BO--1 more reason to avoid stocks (0)

Anonymous Coward | about 2 years ago | (#42585729)

PEBO has a tendancy to come in at the bottom. Buy and hold investors get SCREWED by being forced to tender their shares for cash. PE gets the shares near the bottom. If it turns around, the shareholders don't get to participate. They're forced out. Even if it only comes back a little, averaging down might have rescued you; but it can't... because you're out. PE got your shares. Forced tender. Absolute suckage. IMHO, being a public company requires... you know... some obligation to the public. M and A is OK, but IMHO they shouldn't be allowed to go private.

Re:Private Equity BO--1 more reason to avoid stock (1)

Grishnakh (216268) | about 2 years ago | (#42586271)

Admittedly, my understanding of the rules of public corporation governance is sketchy, but why are stockholders forced to sell their shares? Maybe if they changed the rules so that no one could ever be forced to sell, things would be different.

Re:Private Equity BO--1 more reason to avoid stock (1)

alexander_686 (957440) | about 2 years ago | (#42586647)

Because it is a public company run for the good off all shareholders – and private equity buyouts is the one great defense against a complacent management or minority shareholder.

What if a firm will not be run for the benefit of the shareholder. Maybe the founding family likes the prestige and perks of “owning” a business. Maybe the CEO likes running a big firm – easier to justify the private jet. What are you to do then? Or, take the fillip argument. Dell right now trades at $12.50. Buyout firm offers $20 and you want to take it. But Michael Dell puts his foot down and says no – I want to stay on as CEO – what are you to do?

So the board must seriously consider all proposals but in front of it. Read up on Barbarians at the Gate. Or sit down and watch “Other’s People Money” – it’s fiction – but it’s a good start. http://www.imdb.com/title/tt0102609/ [imdb.com]

Re:Private Equity BO--1 more reason to avoid stock (1)

Grishnakh (216268) | about 2 years ago | (#42586849)

I'm still not seeing why allowing the board to force shareholders to sell is a good thing. If the majority of the shareholders want to run the company in an unprofitable way, so what? Why should anyone be allowed to force them to do otherwise? The minority shareholders can sell their shares and find a more profitable company in that case. If the founding family doesn't have a majority of shares, then this shouldn't even be a problem. Or, for your flip argument, if Michael Dell refuses to sell at $20, and he's the majority shareholder (he has more than 1/2 the shares), then again, I don't see the problem: he owns most of the company, so he should be able to do whatever the hell he wants. Don't like it? Don't buy into a company where one dude owns most of the company. Or, if he doesn't own more than half the shares, then this situation shouldn't arise, as he should be outvoted by others.

Now, in my hypothetical world where no one can be forced to sell, if some private firm goes out and buys up 95% of the shares, then they effectively have control of the company anyway, even if 5% of the shareholders are curmudgeons who refuse to sell. Since they only have 5%, they don't have enough power to do anything.

What am I missing? Other than the fact that the logistics of contacting a bunch of people who have stock shares in their IRA accounts and giving them an offer may be a lot of extra work for the private-equity buyer (but it should be pretty easy these days since most people have their portfolios with a relatively small number of brokerages; also, most shares are probably owned by institutions, not individuals anyway), I'm not seeing the downside.

Re:Private Equity BO--1 more reason to avoid stock (2)

alexander_686 (957440) | about 2 years ago | (#42587185)

What am I missing? Other than the fact that the logistics of contacting a bunch of people who have stock shares in their IRA accounts and giving them an offer may be a lot of extra work for the private-equity buyer (but it should be pretty easy these days since most people have their portfolios with a relatively small number of brokerages; also, most shares are probably owned by institutions, not individuals anyway), I'm not seeing the downside.

The problem here is that you want to treat everybody fairly. When this has been done in the past the buyer would offer generous terms until they got to the 50% mark – at which point they effectively owned the firm – and which point they offered every else a much lower price. Take it or lump it.

This way it’s public. No sweetheart deals. Everybody gets the same price.

As to your larger point - sure, try to pick apart the ownership of Samsung or Formula One. Or read up on early American Railroad corporations.

But let’s start off with your example. You own Dell at $12.50 because you think Dell is worth $12.50. That’s fine. Michael Dell buys 51% of the company – no change in the fundamental underlying value of the company so it’s still $12.50. Then Michael announces that the new mission of Dell is provided him with a lavish lifestyle and that he will be confiscating all of the profits in various tricky joint ventures, sweat heart sales, and a lavish corporate lifestyle. Your stock falls to $1.00.

You suggest 95%, I use 51% - but in reality a holder of 20 to 30% can screw over the minority holders.

Your right – you could lump it. Sell the stock that you think is valued at $12.50 for a $1.00 and invest it someplace different. But how would that make you feel? Is the only option you have as an owner is to walk away?

Re:Private Equity BO--1 more reason to avoid stock (1)

Grishnakh (216268) | about 2 years ago | (#42587295)

Hmm, thanks for explaining it. It does make sense now.

No, I don't care for Intel, MS, or Dell stickers (1)

Impy the Impiuos Imp (442658) | about 2 years ago | (#42585759)

I've bought two Dells since my Pentium Pro, not counting my old Alienware, before Dell bought them.

My most recent two were cheap mid-high range from Best Buy or similar, rather than mail order. Dells on display were now the premium ones, for identical features.

So...screw 'em. Dell has lost its way.

Re:No, I don't care for Intel, MS, or Dell sticker (1)

NatasRevol (731260) | about 2 years ago | (#42586753)

Dell had a 'way'?

Sell Dell to its Asian Suppliers (1)

BoRegardless (721219) | about 2 years ago | (#42585767)

That is the only singular way I can see it will survive. Good? I have no clue.

Re:Sell Dell to its Asian Suppliers (1)

vlm (69642) | about 2 years ago | (#42585851)

Does Dell have a purpose other than being middlemen?

Re:Sell Dell to its Asian Suppliers (1)

HornWumpus (783565) | about 2 years ago | (#42585909)

They're a brand almost as valuable as MTD mowers.

Goodby (1)

AG the other (1169501) | about 2 years ago | (#42585921)

Farewell Dell. I feel sorry for any employees with retirement there.

Re:Goodby (0)

Anonymous Coward | about 2 years ago | (#42587789)

Yep. Dell is about to get Bain'ed. Hopefully, they won't have to hand build the stage that the new CEO will use to announce their firings like Romney's company did in Indiana. Private Equity is just slang for suck everything you can from the company and leave the rest to rot while the PE company runs away with the money--fees paid by the company for the generous "service" of destroying it.

From the inside (4, Insightful)

Saint Dharma (1755726) | about 2 years ago | (#42585967)

Up until May of last year, I worked at Dell as a help desk support representative for one of their clients. IMHO, Dell is in trouble because they have stopped innovating. They've put no effort into making a tablet PC that is as good as what any of the competitors offer, and instead of keeping their technical support focused on supporting their products, that have instead decided to diversify and provide support for companies like Boeing who needed help with their infrastructure and were more willing to sack their entire IT department and get it at a cheaper cost. Nothing new here, no sir.

Re:From the inside (0)

Anonymous Coward | about 2 years ago | (#42587045)

Posting AC cause I work at said aerospace company. I watched the desktop support go to Dell. I watched the server support go to my now current employer. I have various guesses as to why it happened but that moot now. It will be fun to see what they move to if Dell does go toes up cause the only other player I can see out there with solid business class laptops other than Lenovo and I dunno what they have for contract tech support and I am pretty sure the hardware techs are subcontractors to Dell anyway.

As far as the consumer hardware goes, what they make is seems no better or worse than all the other vendors and that probably is also a big issue. They all seem to be commodity parts with a business class device having a sturdier case and a bit better support contract and maybe the ability to use a dock.

Stupid (1)

Billly Gates (198444) | about 2 years ago | (#42586051)

Why couldn't it be HP?

Dell is still making money. Just not growing. I know I know the shareholders cry liquidate if they do not see results by eveyr single quarter with growth regardless of solid fundalmentals and cash onhand.

It is rumored IKahn is trying a hostile takeover with HP and with both HP and Dell gone it means big trouble for corporate buyers. Perhaps the unthinkable SamSung and Asus be corporate products?

Or will it damage the Windows and PC brand more? We keep hearing how PCs are dead and how we are all dying to do real content creation on single tasking oriented GUIs on tiny tablets (sarcasm intended).

Could there be some truth? As in the PC will remain as the mainframe for some special apps no one cares about locked in a server room somewhere? I wish Dell or HP to stay as this will cause chaos in the corporate market. Perhaps that is what is needed or not? What do you all think?

Re:Stupid (1)

Grishnakh (216268) | about 2 years ago | (#42586317)

Or will it damage the Windows and PC brand more? We keep hearing how PCs are dead and how we are all dying to do real content creation on single tasking oriented GUIs on tiny tablets (sarcasm intended).

You say this sarcastically, but it's true. Everyone really is dying to switch over to single-tasking GUIs on tiny tablets. Everywhere you go, people are saying the same thing, that touch UIs and tablets are the way of the future. Even here on Slashdot and other tech forums, all the technophiles are praising Windows 8 and the other various moves to unified touch-enabled interfaces; anyone who disagrees is considered a luddite. Intel is even pushing mfgrs to include touchscreens as a standard feature on laptops now.

Re:Stupid (1)

Billly Gates (198444) | about 2 years ago | (#42586401)

Intel is pushing it because consumers wont touch Windows 8 without it. I feel many are frankly not touching it all but demanding it for at least tollerance. After Vista, many including Dell sold XP units.

Why wont they do this in retail today? I bet if they sold just one model number with Windows 7 it WOULD SELL LIKE HOTCAKES. MS is probably threatening them is my only explanation and it is stupid. If I were bestbuy or Dell/HP/Asus/Samsung/Lenovo I would demand one unit to see if that one sells more.

If that is the case then switch the rest over to Windows 7. MS might be pissed but who gives a fuck? You are there to make money. Not please your suppliers.

Re:Stupid (1)

Grishnakh (216268) | about 2 years ago | (#42586627)

This seems to make sense, but all the other Slashdotters are telling me otherwise. Same goes for most other tech forums. Most people are singing the praises of Windows 8 and touchscreens, and talking about how we're going to have touch-enabled desktop systems soon and everyone's going to get used to holding their arms straight out all day long.

Re:Stupid (1)

Man On Pink Corner (1089867) | about 2 years ago | (#42586977)

Most of those Windows 8 fanboy posts here and elsewhere are obvious shills, though. Basically Ballmer is enlisting the Mechanical Turk in an effort to save his job.

Re:Stupid (1)

Grishnakh (216268) | about 2 years ago | (#42587067)

No way. There's simply far, far too many of these posts to be shills working for Redmond. Worse, there's tons of them here on /., with low-ish UIDs, and I never see many responses refuting these peoples' posts.

I wonder how that fares for Microsoft? (1, Funny)

kurt555gs (309278) | about 2 years ago | (#42586059)

Michael Dell has always swallowed more of Balmer's cock, than would generally be considered comfortable. And Gates's before him. Would new ownership affect this longstanding, gaging, relationship?

Re:I wonder how that fares for Microsoft? (0)

Anonymous Coward | about 2 years ago | (#42586867)

Now for our new Windows RT platform machines! Much better than Samsung's offerings!

Ummm, nevermind.

Re:I wonder how that fares for Microsoft? (0)

Anonymous Coward | about 2 years ago | (#42586969)

Is there any amount that would generally be considered comfortable? Or is there a size issue in play?

BTW, while previewing this comment, the codeword that the submission system asked me to type was "walnuts".

Time to say it (2)

M0j0_j0j0 (1250800) | about 2 years ago | (#42586229)

A Dell - Rolling in the deep.....

More than hardware (3, Interesting)

dancinfrandsen (1985362) | about 2 years ago | (#42586451)

Dell's assets include much more than desktops/latops/servers. For instance, a couple years ago they bought SecureWorks, an MSSP that Gartner positions above Verizon, IBM, and Symantec. They have made many other acquisitions in recent years. From the article, Dell has net $5 billion in cash. I don't think Dell as a company is going anywhere, public or private. Maybe they'll pull an IBM and only sell of the PC side of the house.

Who gets the IP? (1)

mevets (322601) | about 2 years ago | (#42587147)

Colour coded input jacks changed the back side of personal computing.... a Dell innovation.

Re:Who gets the IP? (0)

Anonymous Coward | about 2 years ago | (#42587379)

actually, that color coding is part of the atx specification.. which was from INTEL not dell.

Dude your getting sold! (1)

Joe_Dragon (2206452) | about 2 years ago | (#42587141)

Dude your getting sold!

because of MS surface hardware... (0)

Anonymous Coward | about 2 years ago | (#42587345)

they'll probably kill off their pc unit and reorganize.

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