By Brenon Daly
In the third-largest tech leveraged buyout (LBO), Dell (DELL) will end a quarter-century as a public company in a $24 billion take-private led by Silver Lake Partners. The private equity firm will be joined by Michael Dell, who is maintaining a significant minority stake in the company that he will continue to lead once it goes private. The LBO comes after Dell has struggled for much of the past half-decade to recast its business away from the rapidly diminishing PC market.
As part of that shift, Michael Dell returned as CEO to his namesake firm in early 2007 and (somewhat belatedly) began an M&A spree that eventually totaled some 20 transactions with a tab of $10 billion. The acquisitions got Dell into virtually every part of the tech landscape, including IT services (Perot Systems), security (SecureWorks, SonicWALL), networking (Force10 Networks), storage (Compellent, AppAssure), and infrastructure software (Quest Software).
However, the acquisitions and other strategic shifts that Dell has made have yet to show up in the company's financials. Dell, which just wrapped its fiscal year, is likely to post revenue that’s nearly 10% lower than the previous year. The company's operating income has dropped by about one-third.
Since Michael Dell returned to the corner office six years ago, shares of the company have lost about half their value. Rightly or wrongly, Wall Street still views Dell -- which gets half its revenue from PC sales -- as a low-value "box maker" rather than a strategic supplier of IT products and services. In the end, Dell is exiting the market at just one-quarter the value it once commanded.