8 ms·

Dell Said to Near Buyout as Microsoft Talks Deal Financing

64 points by dangoldin 14y ago

pm90 14y ago
I hope they don't cancel the ubuntu xps developers edition :(
nikster 14y ago
Dell is a surprising addition, but only logical if you consider that every business partner of Microsoft, ever, was either bought out or killed by Microsoft. I am still surprised people want to be business partners with that company. Watch what will happen to Nokia.
pinaceae 14y ago
i don't get what MS is trying to achieve. the market isn't there anymore. so why prop up a business with outside money? dell for consumers is done. low margin commodities can be done without that kind of overhead. a race to the bottom is profitable for while, but then you reach it and boom.
- zapman449 14y ago
  Dell makes a nice bit of coin (2+bil in profit last quarter according to google), mostly from the enterprise stuff, hence the kerfuffle over 3Par 2 years ago. What I don't get is why they're submitting to a leveraged buyout.
  - mbreese 14y ago
    It's Michael Dell that's trying to bring the company private. It's hardly submitting to a leveraged buyout when it's the founder and CEO (who still owns ~ 12% of the company) leading the effort.
- brudgers 14y ago
  "dell for consumers is done." And going private is the best way for Dell to pivot out of that segment without shareholder lawsuits. Or to pivot within it.
- Apocryphon 14y ago
  Wither Alienware?
ChuckMcM 14y ago
I am reminded of a comment I heard attributed to Bill Joy which was "Nothing says 'circling the drain' like one former tech leader buying another former tech leader." I see that there are several reports of this rumor floating around, I suspect that its true and the 'leaker' is someone who is trying to get a better deal by letting the world know you can buy Dell for $14/share. I expect it is a positive for Dell to go private again, but I don't know if its in Microsoft's interest to be part of the game. I expect a successful Dell strategy might be to partner with Redhat and move their product line to something more standard with solid Linux support. Which is to say something closer to Supermicro's strategy but with Redhat on board.
- OGinparadise 14y ago
  I expect it is a positive for Dell to go private again, but I don't know if its in Microsoft's interest to be part of the game. Even according to your prediction, at worst they get their money back and then some. My guess is that MS wants the next Dell to still be a MS ally. Microsoft isn't going away anytime soon and Dell needs to keep that in mind if they want to be worth more than what it is today.
- bcantrill 14y ago
  I had the same thought. Specifically, the thought that immediately struck me was the HP acquisition of Compaq/DEC, which Scott McNealy famously called "two garbage trucks colliding." Dell is in a hot world of hurt, with Supermicro on one side and tablets on the other -- and I don't see how they compete with either of them, let alone both...
- brudgers 14y ago
  According to the article, Microsoft is not buying Dell. They are financing the deal - and at $2 billion, essentially out of petty cash. While there are many possible upsides, the one that stands out is that as a private entity, they can participate with Microsoft on research without worrying about Wall Street's demands for quarterly growth. For Microsoft, inside knowledge of the hardware roadmap will help them maintain leadership in the Enterprise segment. As for Red Hat, they didn't earn $2 billion in net revenue last year. And Linux is certainly not a path to success with consumers or on the enterprise desktop.
blhack 14y ago
What replaced Dell? HP? Offices are still buying desktop PCs by the pallet-load. What are they buying? edit: I'll answer my own question: http://en.wikipedia.org/wiki/Market_share_of_leading_PC_vendors#2006-2012 http://en.wikipedia.org/wiki/Market_share_of_leading_PC_vend...
- bigdubs 14y ago
  Those offices are buying super low margin PCs that make Dell very little money. The PC market is fairly cutthroat, a result of, all things, Microsofts general business philosophy of commodifying its complements.
- nonamegiven 14y ago
  Lenovo around here. EDIT: And in some places, virtual machines. Good for MS and those places, not so good for Dell.
  - SideburnsOfDoom 14y ago
    > EDIT: And in some places, virtual machines All VMs run on hardware.
    - kalininalex 14y ago
      But it may be increasingly assembled by the providers of virtual services from components, rather than purchased from Dell.
    - nonamegiven 14y ago
      But it's not generally 1-1.
      - SideburnsOfDoom 14y ago
        Oh yes, local VMs and VMs on servers and in the cloud are great; but you also need one device in front of each office worker that connects to them.
incision 14y ago
I could see a certain benefit to a Microsoft-owned Dell. It might sound strange to the HN crowd, but I've actually seen more loyalty toward Dell than MS in "the enterprise" recently. I could see a strategy around retaining and expanding certain parts of the the enterprise business being enabled by owning and integrating the entire stack.
sabalaba 14y ago
Dell is not being purchased by Microsoft. Silver Lake Partners, a PE firm that does investments and leveraged buyouts (LBOs), is conducting an LBO of Dell. Microsoft is merely providing some of the capital for the buyout, which would likely take the form of a loan to Silver Lake Partners. Again, Microsoft is not buying Dell, Silver Lake Partners is. It makes a lot of sense for MS 1. from a strategic standpoint, 2. Microsoft having tens of billions of cash reserves which need a return, and 3. MS + Silver lake have a prior relationship: MS purchased Skype from them.
Nux 14y ago
Cool. Secure Boot for all your dell stuff.
antidaily 14y ago
I'm sure Dell would have preferred Microsoft give them an OS that people would want to buy PC to use. But this will do.
confluence 14y ago
Dell on Apple in '97: > "I’d shut it down and give the money back to the shareholders" Dell on Dell today: See above. Sound like he heeds his own advice Have to respect that :)
- thetrb 14y ago
  They're not shutting Dell down...
  - deleted 14y ago
    [deleted]
  - chiph 14y ago
    But if they're going to be backed by private equity ... those guys REALLY want their 20+% return in five years. And they'll direct Dell to shutter unprofitable or non-key parts of their business as soon as possible. I expect Dell to be a much smaller company a year from now.
jbail 14y ago
I haven't bought a Dell PC since 2000. It was a piece of junk. Their support was also junk. I'm curious if this has changed in the past decade. Anyone bought a Dell recently that wants to weigh in? EDIT: Guess not (which isn't too surprising)
- to3m 14y ago
  It's hardly scientific, but both my parents have Dell laptops, and they seem happy enough with them. I'm not a big fan of the plastic construction, having been spoiled by my metal Macbook, but they seem solid enough, and apparently there's always some special offer of one kind or another to take advantage of, so the prices can be very reasonable. And my old employer bought dell desktops. I guess they had some bulk deal or something. They always seemed basically fine, and felt pretty solidly put together - I wouldn't have wanted mine to fall on my foot. Some of the staff had dell laptops, and nobody seemed to have much to say about them one way or the other. Which is probably exactly what you want, really... I can't speak for older Dell stuff, nor for anybody else's experience, but I've seen no evidence that their computers are worth avoiding.
- thetrb 14y ago
  The newer products are actually pretty good: XPS 12, XPS 27, they announced the XPS 13 with a 1080p screen, and so on... However, I think they had some problems before that and this might be one of the reasons why they're in a pretty bad shape right now (the other big reason being the iPad, tablets in general, Android, etc. of course).
- nikster 14y ago
  Dell customer service was awesome, then turned awful in 2000 or so when Dell left the company. I dont know how it is now but I imagine better again? Dells entire value was solid computers + great service, thats how they got big. These days I suppose everybody makes pretty good quality hardware. Having said that my last PC purchase was in 2005. All Mac since then.
redwood 14y ago
Microsoft will now have their hands in 1) Facebook 2) Nokia 3) Dell Interesting
- bluedanieru 14y ago
  And all that without making anything anyone gives a shit about :-)
shirro 14y ago
Dell, Nokia, Borders, Blockbuster. The world changes and people shift platforms. It doesn't matter how good the company is when they don't have products anyone wants. The enterprise market is still there but not so much with Dell and it is never going to have the same margins again. Microsoft is just going to draw this out.
gamble 14y ago
I don't see what advantages Dell hopes to gain by going private. Dell has always been a one-trick pony: reduce the cost of PCs and servers by eliminating retail operations and manufacturing to-order or overseas. Everyone caught up to Dell a decade ago. Their problem today is that they provide nothing distinctive and occupy a stagnant market niche. Are they planning some sort of outrageously-expensive pivot to Apple-style consumer electronics or a Nokia-style desperation move to pin all their hopes on Microsoft's mobile platforms?
sandGorgon 14y ago
Dell desktops and laptops are incredibly popular in India because they are officially Linux supported (N series) and because of their CompleteCover warranty, which is awesome. Macbooks are very expensive out here, plus Apple warranty is really, really bad. Surprisingly, the other company which has a decent after sales support is Samsung (Lenovo sells through resellers, which screws up the experience).

64 points by dangoldin 14y ago

pm90 14y ago

I hope they don't cancel the ubuntu xps developers edition :(

Dell is a surprising addition, but only logical if you consider that every business partner of Microsoft, ever, was either bought out or killed by Microsoft. I am still surprised people want to be business partners with that company. Watch what will happen to Nokia.

pinaceae 14y ago

i don't get what MS is trying to achieve. the market isn't there anymore. so why prop up a business with outside money? dell for consumers is done. low margin commodities can be done without that kind of overhead. a race to the bottom is profitable for while, but then you reach it and boom.

zapman449 14y ago
Dell makes a nice bit of coin (2+bil in profit last quarter according to google), mostly from the enterprise stuff, hence the kerfuffle over 3Par 2 years ago. What I don't get is why they're submitting to a leveraged buyout.
- mbreese 14y ago
  It's Michael Dell that's trying to bring the company private. It's hardly submitting to a leveraged buyout when it's the founder and CEO (who still owns ~ 12% of the company) leading the effort.
brudgers 14y ago
"dell for consumers is done." And going private is the best way for Dell to pivot out of that segment without shareholder lawsuits. Or to pivot within it.
Apocryphon 14y ago
Wither Alienware?

ChuckMcM 14y ago

I am reminded of a comment I heard attributed to Bill Joy which was "Nothing says 'circling the drain' like one former tech leader buying another former tech leader." I see that there are several reports of this rumor floating around, I suspect that its true and the 'leaker' is someone who is trying to get a better deal by letting the world know you can buy Dell for $14/share. I expect it is a positive for Dell to go private again, but I don't know if its in Microsoft's interest to be part of the game. I expect a successful Dell strategy might be to partner with Redhat and move their product line to something more standard with solid Linux support. Which is to say something closer to Supermicro's strategy but with Redhat on board.

OGinparadise 14y ago
I expect it is a positive for Dell to go private again, but I don't know if its in Microsoft's interest to be part of the game. Even according to your prediction, at worst they get their money back and then some. My guess is that MS wants the next Dell to still be a MS ally. Microsoft isn't going away anytime soon and Dell needs to keep that in mind if they want to be worth more than what it is today.
bcantrill 14y ago
I had the same thought. Specifically, the thought that immediately struck me was the HP acquisition of Compaq/DEC, which Scott McNealy famously called "two garbage trucks colliding." Dell is in a hot world of hurt, with Supermicro on one side and tablets on the other -- and I don't see how they compete with either of them, let alone both...
brudgers 14y ago
According to the article, Microsoft is not buying Dell. They are financing the deal - and at $2 billion, essentially out of petty cash. While there are many possible upsides, the one that stands out is that as a private entity, they can participate with Microsoft on research without worrying about Wall Street's demands for quarterly growth. For Microsoft, inside knowledge of the hardware roadmap will help them maintain leadership in the Enterprise segment. As for Red Hat, they didn't earn $2 billion in net revenue last year. And Linux is certainly not a path to success with consumers or on the enterprise desktop.

blhack 14y ago

What replaced Dell? HP? Offices are still buying desktop PCs by the pallet-load. What are they buying? edit: I'll answer my own question: http://en.wikipedia.org/wiki/Market_share_of_leading_PC_vendors#2006-2012 http://en.wikipedia.org/wiki/Market_share_of_leading_PC_vend...

bigdubs 14y ago
Those offices are buying super low margin PCs that make Dell very little money. The PC market is fairly cutthroat, a result of, all things, Microsofts general business philosophy of commodifying its complements.
nonamegiven 14y ago
Lenovo around here. EDIT: And in some places, virtual machines. Good for MS and those places, not so good for Dell.
- SideburnsOfDoom 14y ago
  > EDIT: And in some places, virtual machines All VMs run on hardware.
  - kalininalex 14y ago
    But it may be increasingly assembled by the providers of virtual services from components, rather than purchased from Dell.
  - nonamegiven 14y ago
    But it's not generally 1-1.
    - SideburnsOfDoom 14y ago
      Oh yes, local VMs and VMs on servers and in the cloud are great; but you also need one device in front of each office worker that connects to them.

incision 14y ago

I could see a certain benefit to a Microsoft-owned Dell. It might sound strange to the HN crowd, but I've actually seen more loyalty toward Dell than MS in "the enterprise" recently. I could see a strategy around retaining and expanding certain parts of the the enterprise business being enabled by owning and integrating the entire stack.

sabalaba 14y ago

Dell is not being purchased by Microsoft. Silver Lake Partners, a PE firm that does investments and leveraged buyouts (LBOs), is conducting an LBO of Dell. Microsoft is merely providing some of the capital for the buyout, which would likely take the form of a loan to Silver Lake Partners. Again, Microsoft is not buying Dell, Silver Lake Partners is. It makes a lot of sense for MS 1. from a strategic standpoint, 2. Microsoft having tens of billions of cash reserves which need a return, and 3. MS + Silver lake have a prior relationship: MS purchased Skype from them.

Nux 14y ago

Cool. Secure Boot for all your dell stuff.

antidaily 14y ago

I'm sure Dell would have preferred Microsoft give them an OS that people would want to buy PC to use. But this will do.

confluence 14y ago

Dell on Apple in '97: > "I’d shut it down and give the money back to the shareholders" Dell on Dell today: See above. Sound like he heeds his own advice Have to respect that :)

thetrb 14y ago
They're not shutting Dell down...
- deleted 14y ago
  [deleted]
- chiph 14y ago
  But if they're going to be backed by private equity ... those guys REALLY want their 20+% return in five years. And they'll direct Dell to shutter unprofitable or non-key parts of their business as soon as possible. I expect Dell to be a much smaller company a year from now.

jbail 14y ago

I haven't bought a Dell PC since 2000. It was a piece of junk. Their support was also junk. I'm curious if this has changed in the past decade. Anyone bought a Dell recently that wants to weigh in? EDIT: Guess not (which isn't too surprising)

to3m 14y ago
It's hardly scientific, but both my parents have Dell laptops, and they seem happy enough with them. I'm not a big fan of the plastic construction, having been spoiled by my metal Macbook, but they seem solid enough, and apparently there's always some special offer of one kind or another to take advantage of, so the prices can be very reasonable. And my old employer bought dell desktops. I guess they had some bulk deal or something. They always seemed basically fine, and felt pretty solidly put together - I wouldn't have wanted mine to fall on my foot. Some of the staff had dell laptops, and nobody seemed to have much to say about them one way or the other. Which is probably exactly what you want, really... I can't speak for older Dell stuff, nor for anybody else's experience, but I've seen no evidence that their computers are worth avoiding.
thetrb 14y ago
The newer products are actually pretty good: XPS 12, XPS 27, they announced the XPS 13 with a 1080p screen, and so on... However, I think they had some problems before that and this might be one of the reasons why they're in a pretty bad shape right now (the other big reason being the iPad, tablets in general, Android, etc. of course).
nikster 14y ago
Dell customer service was awesome, then turned awful in 2000 or so when Dell left the company. I dont know how it is now but I imagine better again? Dells entire value was solid computers + great service, thats how they got big. These days I suppose everybody makes pretty good quality hardware. Having said that my last PC purchase was in 2005. All Mac since then.

redwood 14y ago

Microsoft will now have their hands in 1) Facebook 2) Nokia 3) Dell Interesting

bluedanieru 14y ago
And all that without making anything anyone gives a shit about :-)

shirro 14y ago

Dell, Nokia, Borders, Blockbuster. The world changes and people shift platforms. It doesn't matter how good the company is when they don't have products anyone wants. The enterprise market is still there but not so much with Dell and it is never going to have the same margins again. Microsoft is just going to draw this out.

gamble 14y ago

I don't see what advantages Dell hopes to gain by going private. Dell has always been a one-trick pony: reduce the cost of PCs and servers by eliminating retail operations and manufacturing to-order or overseas. Everyone caught up to Dell a decade ago. Their problem today is that they provide nothing distinctive and occupy a stagnant market niche. Are they planning some sort of outrageously-expensive pivot to Apple-style consumer electronics or a Nokia-style desperation move to pin all their hopes on Microsoft's mobile platforms?

sandGorgon 14y ago

Dell desktops and laptops are incredibly popular in India because they are officially Linux supported (N series) and because of their CompleteCover warranty, which is awesome. Macbooks are very expensive out here, plus Apple warranty is really, really bad. Surprisingly, the other company which has a decent after sales support is Samsung (Lenovo sells through resellers, which screws up the experience).