David Yoffie – Strategy: Taking Dell Private Materials: Michael Dell and the private equity firm Silver Lake today walked away with their prize, the computing company Dell, having won the approval from a significant majority of shareholders to take the company private in a $25 billion leveraged buyout. Success for Dell as a private company ” which it will be within a few months ” is by no means assured. Simply put, the plan calls for Dell to double down on investments in research and development and acquisitions that will be intended to expand its each into enterprise-focused businesses including software, services and cloud computing.
The personal computer business ” both consumer and business- focused ” which accounts for most of Dell’s revenue will become less of a focus. Assignment: – In 1984, Michael Dell founded Dell Computer Corp. Dell sales grew from $6Mn to $40Mn in the first 2 yrs. – Dell focused on low cost (often customized) confgurations and shook up the whole sector. – In June 1988, Dell goes public selling 3. 5Mn shares @ $8. 5. – With the crash in 2000, Dell cut significantly price thanks to its low inventory nd no R. It gained market share.
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It became the top PC-seller with 13% of global sales and grew to 20%. Net Income hits a new high of $3. 0Bn in 2004. At that time M. Dell step down and Kevin Rollins becomes CEO. By 2006, Net Income falls by almost 30%, share price goes down and in 2007 M. Dell comes back as CEO. – By that time, several trends in the industry start pressuring Dell’s business model: declining values of customized PCs, surge in consumer sales in retail channels, PC production from emerging markets, and the rise of smartphones. None of Dell’s changes and initiatives works.
In the storage segment they have a portion of 7. 2%, Network 1%. Taking Dell private would relief them from a lot of pressure to deliver quarterly results hence they can focus in strengthening in growth areas. 3. Assess Dell’s board’s performance. Give them a grade. – they don’t seem to have done a lot – seriously overpaid consultants. They did a good work but only pointed out the obvious and put number on paper. In principal, whether those targets are achievable s another story as all the growth areas have already strong market leaders. Not sure what Dell would like to capitalize on?
Cisco has biggest market share in Networking, EMC and IBM seems market leaders in Storage. The report seems highly inflated. The reporting was done by 3 different groups which showed inconsistency in their reporting and somewhat confusing. This is evident in the participation process whereby 70 parties expressed interest and only 2 actually submitted intend. 4. Would you put your own money in Dell at Michael Dell’s price–$13. 88? – Why not. M. Dell seems to believe he can turn around the company. Also, Dell is a well recognizable worldwide brand name. I think he is getting a great price to buyback his own company.
On the downside, Dell has never worked on something other than PCS. Eight months is a long time to stay mum, especially for a tech industry wunderkind, enduring daily bombs from Carl Icahn about his leadership and ethics. (“All would be swell at Dell if Michael and the board bid farewell,” Icahn tweeted at one point. ) So as he strides in front of 350 employees in the glass-enclosed conference room of Dell’s Silicon Valley division a few weeks ago, with celebratory gourmet cupcakes rosted with the company’s blue logo nearby, you can literally feel a weight coming off his chest. It’s great to be here and to not have to introduce Carl Icahn to you,” says Dell, the parry prompting laughter and cheers. In Jan14 fired CComO, CFO, layoffs in different departments p. ” Dell Research is divided into four groups: Security Data Insights Mobility and Internet of Things Modern Infrastructures Each group has its own chief data scientists. Already the division has delivered a Tech Outlook, which posits the growth and development, at an industry level, of things like:
Insider Threat Research, which looks for a way to help businesses and governments identify the next Edward Snowden before it happens. Next-Gen Flash Memory technologies like phase-change memory and persistent RAM, all of which could make future flash storage up to 100-times faster than your current mobile storage solution. Smart Algorithms that could predict not Just the weather, but help the company decide in advance how many plows they’ll need and where, exactly, to position them. Data Insights, which takes analytics beyond visualization and predictive analysis to prescriptiveanalysis.