4 ms·

I don't think Dell is going to innovate post-LBO. It's going to be saddled with debt, most of it bank debt. The new owners are going to sell off all activities

I don't think Dell is going to innovate post-LBO. It's going to be saddled with debt, most of it bank debt. The new owners are going to sell off all activities that don't generate cash and milk the remaining parts until the debt is paid off. An LBO is basically a gamble that there is a cash cow under all the fat, and once the fat is trimmed investors will see the company's true value.

kordless 14y ago
I think there is a huge opportunity for Dell in the private cloud space. They may not innovate on technology, but they could certainly innovate with new business models using emerging technologies like OpenStack.
- deleted 14y ago
  [deleted]
- Swannie 14y ago
  I wonder how much Microsoft likes OpenStack... I can guess, given how much they and their customers like System Center.
- incision 14y ago
  Possibly. Cisco has been dabbling in that area with CITEIS, but I don't get the impression it has seen too much traction. I expect an overwhelming majority of Dell gear that is doing anything along the lines of private, flexible infrastructure is running VMWare who seems to getting ever closer to EMC (whose relationship with Dell is probably thoroughly sour post-Compellent acquisition). I'd think Dell's best shot a such a move might be to work with Microsoft on a private, Azure-branded stack. I get the impression that there isn't much behind the stated OpenStack membership/support by the Enterprise names.
- roc 14y ago
  Dell has plenty of opportunities, given their enterprise customers. The tricky part is: almost all of those opportunities involve new services for post-Microsoft IT. And how is Microsoft and their two billion dollars going to react to those plans?
jusben1369 14y ago
I think that's a fairly cynical response. Dell (Michael) is worth a huge amount. He has a very large stake and isn't doing this to milk his company. Whether he's successful or not is another question but it's certainly no cynical milking exercise. Now he can dig deep, not worry about earnings for the next 12 months, and tackle new opportunities.
- rrrrtttt 14y ago
  The company's stock has been falling because investors think the PC is dying. His taking the company private means he thinks investors are wrong and the stock is undervalued. I never said this is a cynical exercise, but I think his incentive is purely financial.
- chiph 14y ago
  Except that now, he's probably a minority shareholder (I think he invested $1bn of his own money, and I saw that MSFT invested $2bn) so if they say jump, he has to ask "how high?" All depends on how the deal was structured, though. Silver Lake, if they're like other private equity firms, are going to want a 20% return in around 5 years. They're going to put pressure on him to sell the unprofitable parts of the firm.
refurb 14y ago
That's a very odd claim. Lexmark came about when an LBO was used to acquire IBM's printer division. It did pretty well, no?
hkmurakami 14y ago
If there was ever a time when a company was going to be "okay" under massive amounts of debt, it's in today's interest rate climate where companies can borrow money for very little compared to previous eras.

kordless 14y ago

I think there is a huge opportunity for Dell in the private cloud space. They may not innovate on technology, but they could certainly innovate with new business models using emerging technologies like OpenStack.

deleted 14y ago
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Swannie 14y ago
I wonder how much Microsoft likes OpenStack... I can guess, given how much they and their customers like System Center.
incision 14y ago
Possibly. Cisco has been dabbling in that area with CITEIS, but I don't get the impression it has seen too much traction. I expect an overwhelming majority of Dell gear that is doing anything along the lines of private, flexible infrastructure is running VMWare who seems to getting ever closer to EMC (whose relationship with Dell is probably thoroughly sour post-Compellent acquisition). I'd think Dell's best shot a such a move might be to work with Microsoft on a private, Azure-branded stack. I get the impression that there isn't much behind the stated OpenStack membership/support by the Enterprise names.
roc 14y ago
Dell has plenty of opportunities, given their enterprise customers. The tricky part is: almost all of those opportunities involve new services for post-Microsoft IT. And how is Microsoft and their two billion dollars going to react to those plans?

jusben1369 14y ago

I think that's a fairly cynical response. Dell (Michael) is worth a huge amount. He has a very large stake and isn't doing this to milk his company. Whether he's successful or not is another question but it's certainly no cynical milking exercise. Now he can dig deep, not worry about earnings for the next 12 months, and tackle new opportunities.

rrrrtttt 14y ago
The company's stock has been falling because investors think the PC is dying. His taking the company private means he thinks investors are wrong and the stock is undervalued. I never said this is a cynical exercise, but I think his incentive is purely financial.
chiph 14y ago
Except that now, he's probably a minority shareholder (I think he invested $1bn of his own money, and I saw that MSFT invested $2bn) so if they say jump, he has to ask "how high?" All depends on how the deal was structured, though. Silver Lake, if they're like other private equity firms, are going to want a 20% return in around 5 years. They're going to put pressure on him to sell the unprofitable parts of the firm.

refurb 14y ago

That's a very odd claim. Lexmark came about when an LBO was used to acquire IBM's printer division. It did pretty well, no?

hkmurakami 14y ago

If there was ever a time when a company was going to be "okay" under massive amounts of debt, it's in today's interest rate climate where companies can borrow money for very little compared to previous eras.