Michael Dell successfully turned the company he founded into a private entity and away from Wall Street scrutiny, but experts believe that the buyout that was announced on Tuesday will not solve the growing troubles of the PC industry.
Michael Dell announced on Tuesday that the company will go private in a $24.4 billion buyout that will put the company under his control along with Silver Lake, which was one of the major financers of the buyout deal.
During the announcement of the buyout, Dell hinted that the company will go into a different direction. Aside from producing personal computers, the company will transform into a service and software company. The move was a result of the skidding demands for personal computers because of the rapid shift of consumers to high-end devices like tablets and smartphones.
Endpoint Technologies analyst Roger Kay said that Dell’s decision to take the risky move just highlighted the growing troubles of the PC business
Kay said: “It’s an illustration of how tough the PC business is that Dell had to take this extreme step. Michael has been trying to turn Dell into a supplier of enterprise solutions for a long time. He has pleaded with Wall Street to give him time. The commodity PC business has been suffering. Dell may probably keep the higher margin consumer lines but maybe look at rest of the portfolio.”
On the other hand, another analyst, Shaw Wu, said that turning private will take the company out of the “quarter-to-quarter grind of being a publicly traded company”, but reiterated that Dell is facing a difficult task ahead of them.
Wu said: “Despite the company’s strong efforts to transform itself, we estimate that about 70 percent of its business is tied to PCs. On the positive, we believe going private takes the company out of the quarter-to-quarter grind of being a publicly traded company. But on the negative, not having publicly traded stock could make it more difficult to make larger, transformative acquisitions.”
From being the world’s largest producer of personal computers, Dell dropped to third, behind Hewlett-Packard and Lenovo, with a market share of 10.6 percent in the last quarter of 2012.