Dell Forced to Go Private in Search of a Turnaround: 10 Reasons Why

By Don Reisinger  |  Posted 2013-02-05 Print this article Print

5. The management isn’t prepared for the new age

After Michael Dell came back to the company he founded, he made shareholders believe that he knew what it would take to get the PC maker back on track. Now years later, it’s clear that Dell and his management team are a little lost. And because it lost its way Dell watched his company falter which forced him to consider the costly step of going private. If Dell’s management was more capable, the company might not have avoided the drastic step of going private.

6. The stock price has slid

The only reason Dell was able to make a deal happen with Silver Lake Partners is that its shares are actually quite cheap. As noted, Dell is being bought out for $13.65, a slight premium over its closing price on Feb. 4 of $13.27. To put that share price into perspective, Dell’s stock has fallen 24 percent in the past year and is down a whopping 34 percent over the past five years. Silver Lake saw a good deal was available for a company with $3.5 billion in net income in 2012 and decided to help Dell out.

7. No answer for smartphones

Smartphones have proven to be vexing problem for Dell. The company has tried on numerous occasions to jump into the smartphone market, but each time, its efforts have fallen short. If Dell could have established itself as a smartphone contender earlier, the company might not have been forced to take such a drastic step as going private.

8. Tablets are a nonstarter

Tablets have also proven to be the downfall of Dell’s business. The company has tried and failed to deliver Android-based slates that proved popular with buyers. Although Dell tried to blame it on poor timing, the company’s tablet shortcomings really had more to do with the fact that it didn’t understand what customers wanted in terms of high-quality designs and high-end components. The fact that tablets are so important today and Dell has no presence in that market is a huge setback for the company.

9. It needs help on the cloud

The cloud could very well be the way Dell makes its way back into the good graces of enterprise customers. However, transitioning its business to leverage the cloud more effectively and perhaps reduce its reliance on PCs and mobile would be something that would be viewed as too risky by shareholders if it remained a public company. By going private, that problem is eliminated and Dell can focus on the cloud.

10. Michael Dell says so

As Michael Dell goes, so goes the company he founded. It’s clear that Dell himself was the primary voice behind the decision to go private. So, perhaps it shouldn’t come as much of a surprise that Dell readily made the decision to go from public to private. When Michael Dell says something is happening, it does.

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