Michael Dell's tough road ahead
Arranging a $24.4 billion buyout of his company is the easy part. There's also a declining PC industry and a fiercely competitive device market to contend with.
As head of a private company, Michael Dell will have the opportunity to tinker with his business model away from the prying eyes of Wall Street. Success, though, is not a given. The Round Rock, Texas, company was built on the personal computer, a business that has been eroding for years.
To make matters worse, Dell has been unable to regain the top spot in the PC market that it lost in 2006 to Hewlett-Packard (HPQ). In fact, as Engadget noted, Dell's position continues to worsen. Dell held 10.5% of the market in the third quarter, trailing Lenovo and HP.
Unfortunately, PCs still account for about half of Dell's business, and the company's efforts to expand its offerings have not gone well. For instance, Dell's Streak 7 tablet generated few sales and got awful reviews. Dell quit the smartphone business last year after lackluster results. The company's customer service problems have also been well documented by the press for years.
Michael Dell has joined forces with Silver Lake Management to take the company private. He's going to contribute his 14% stake in Dell toward the deal along with additional cash, according to news reports. In the press release announcing the deal, he said, "I believe this transaction will open an exciting new chapter for Dell, our customers and team members."
Sounds familiar, no?
HP reportedly is mocking Dell's plan, arguing that it creates uncertainty for its customers. But HP is in the same boat as Dell in many ways, and CEO Meg Whitman may one day have to follow her rival out of the public markets.
--Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter @jdberr.
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