DELL - Dell Inc.

[txlaw]

So yesterday I was thinking a bit about this whole DELL investment, and it now makes some sense to me why they instituted a dividend last year, which I was quite critical of at the time, since I felt that buying back stock would clearly have been a superior option.

 

Perhaps Michael Dell was trying to signal to the market and potential PE investors the debt capacity that New Dell could safely service based solely on earnings.  Or maybe he was trying to get talks to move by committing to distributing cash to shareholders.  Or maybe it was just a smokescreen move.

 

I don't know -- anyone have any thoughts on this?

[MVP444300]

http://www.reuters.com/article/2013/02/01/us-dell-buyout-idUSBRE91009K20130201

 

Dell nears buyout, deal could come as soon as Monday: sources

[MVP444300]

So yesterday I was thinking a bit about this whole DELL investment, and it now makes some sense to me why they instituted a dividend last year, which I was quite critical of at the time, since I felt that buying back stock would clearly have been a superior option.

 

Perhaps Michael Dell was trying to signal to the market and potential PE investors the debt capacity that New Dell could safely service based solely on earnings.  Or maybe he was trying to get talks to move by committing to distributing cash to shareholders.  Or maybe it was just a smokescreen move.

 

I don't know -- anyone have any thoughts on this?

 

TX:  I have no idea what the real motive was it would be purely speculation for me to guess.  Having said that, I thought it was quite stupid move myself for them to start issuing dividends when they could have been buying stock so cheaply. 

[txlaw]

So yesterday I was thinking a bit about this whole DELL investment, and it now makes some sense to me why they instituted a dividend last year, which I was quite critical of at the time, since I felt that buying back stock would clearly have been a superior option.

 

Perhaps Michael Dell was trying to signal to the market and potential PE investors the debt capacity that New Dell could safely service based solely on earnings.  Or maybe he was trying to get talks to move by committing to distributing cash to shareholders.  Or maybe it was just a smokescreen move.

 

I don't know -- anyone have any thoughts on this?

 

TX:  I have no idea what the real motive was it would be purely speculation for me to guess.  Having said that, I thought it was quite stupid move myself for them to start issuing dividends when they could have been buying stock so cheaply.

 

Yeah, I thought so too.  Just speculating whether or not there was method to that madness. 

 

It will be interesting to get the full story on all this a couple of years from now.

[T-bone1]

Bloomberg says Dell's board may be meeting tonight to vote on a buyout at $13.75 or so:

 

http://www.bloomberg.com/news/2013-02-04/dell-board-said-to-meet-tonight-to-vote-on-leveraged-buyout.html?cmpid=yhoo

[ourkid8]

I would be extremely annoyed if the BOD accepts this low ball offer.

 

S

Bloomberg says Dell's board may be meeting tonight to vote on a buyout at $13.75 or so:

 

http://www.bloomberg.com/news/2013-02-04/dell-board-said-to-meet-tonight-to-vote-on-leveraged-buyout.html?cmpid=yhoo

[Guest wellmont]

So yesterday I was thinking a bit about this whole DELL investment, and it now makes some sense to me why they instituted a dividend last year, which I was quite critical of at the time, since I felt that buying back stock would clearly have been a superior option.

 

Perhaps Michael Dell was trying to signal to the market and potential PE investors the debt capacity that New Dell could safely service based solely on earnings.  Or maybe he was trying to get talks to move by committing to distributing cash to shareholders.  Or maybe it was just a smokescreen move.

 

I don't know -- anyone have any thoughts on this?

 

yes a big buyback would have made it more expensive for him to buy the company. it would have used up cash on the balance sheet to do the deal with and raised the price of the shares. paying a dividend didn't change the value equation because he was paying out only a portion of current earnings. it looks like MD is not interested in creating long term value for every shareholder. just him and a few others. one kind of wonders now why he was never more aggressive over the years in trying to close the intrinsic value gap that existed in the shares for a long time.

[boilermaker75]

Bloomberg says Dell's board may be meeting tonight to vote on a buyout at $13.75 or so:

 

http://www.bloomberg.com/news/2013-02-04/dell-board-said-to-meet-tonight-to-vote-on-leveraged-buyout.html?cmpid=yhoo

 

I am not happy with that price. So I was looking to write some 14-strike covered calls this morning. But the stock kept dropping and before I pulled the trigger the options went from > $0.25 to < $0.10 so I didn't do it.

[T-bone1]

I'm not sure what sort of precedent there is for this type of thing, but I would think that massive share buybacks as well as huge insider buying by Michael Dell himself - all done within the last few years at prices of $15 and higher - would make it harder to take the company private at $13.50.

 

This makes me think the deal gets done at $15-16 (after a board review and threatened shareholder lawsuits).  Since the deal is basically contingent on $5 billion in equity from Michael Dell (rolling over his stake and adding more cash), he doesn't need to worry about being outbid . . . thus I think its safe to assume that he isn't going to lead with his highest bid.

 

I would think it would be pretty easy for a plaintiff's attorney representing shareholders to go after Michael Dell for taking it private below $15, as his own actions demonstrate that he thinks it is worth at least that amount.  Because a deal is contingent on his participation, shareholders are effectively denied a competitive bidding process - unless he is willing to participate with other buyout groups during the go shop period - which I doubt.

 

Like I said, I don't know what the precedent is here, but I think this is an easy deal at $15 and potentially a very difficult one at $13.75.  I think the stock is probably worth $25, so if I was Michael Dell I would lead with this bid, but understand that I would need to raise it to $15 at some point to get approval.

[sampr01]

dell LBO at $13.65

 

http://www.theflyonthewall.com/permalinks/entry.php/DELL;MSFTid1780999/DELL;MSFT-Dell-to-be-taken-private-by-Michael-Dell-Silver-Lake-at--per-share

[racemize]

so did this end up being a good result or a bad result for most people that went in?  I imagine this price is very low compared to what you thought it was worth?

 

Basically, just wondering what the post-mortem is, assuming this goes through.

[tooskinneejs]

Looks like a take-under to me.

[boilermaker75]

I'm not sure what sort of precedent there is for this type of thing, but I would think that massive share buybacks as well as huge insider buying by Michael Dell himself - all done within the last few years at prices of $15 and higher - would make it harder to take the company private at $13.50.

 

This makes me think the deal gets done at $15-16 (after a board review and threatened shareholder lawsuits).  Since the deal is basically contingent on $5 billion in equity from Michael Dell (rolling over his stake and adding more cash), he doesn't need to worry about being outbid . . . thus I think its safe to assume that he isn't going to lead with his highest bid.

 

I would think it would be pretty easy for a plaintiff's attorney representing shareholders to go after Michael Dell for taking it private below $15, as his own actions demonstrate that he thinks it is worth at least that amount.  Because a deal is contingent on his participation, shareholders are effectively denied a competitive bidding process - unless he is willing to participate with other buyout groups during the go shop period - which I doubt.

 

Like I said, I don't know what the precedent is here, but I think this is an easy deal at $15 and potentially a very difficult one at $13.75.  I think the stock is probably worth $25, so if I was Michael Dell I would lead with this bid, but understand that I would need to raise it to $15 at some point to get approval.

 

No matter what the price there will be a lawsuit. So might as well start low like at $13.50.

[txlaw]

Official press release:

http://www.dell.com/Learn/us/en/uscorp1/secure/2013-02-04-michael-dell-silverlake-acquisition

 

I'm very disappointed, despite having made a good amount of money on this idea.  MSD and Silver Lake are stealing the company, IMO. 

 

Sanjeev was dead on about how this would play out -- except that the buyout price is even worse than $14!

 

Well, I wish DELL luck going forward, as they are an important company to Austin, and I think they can do really cool things.  Too bad about how this went down, though.

[VAL9000]

so did this end up being a good result or a bad result for most people that went in?  I imagine this price is very low compared to what you thought it was worth?

 

Basically, just wondering what the post-mortem is, assuming this goes through.

 

It was very good for me (thanks again, txlaw), but it should have been better.  I posted previously that I think the services business is worth $17-18bn.  This means that all of the software and hardware businesses are being sold for $6bn.  That's incredibly low.  Lenovo is worth $10bn, as a comparison.

 

Does anyone know how this works now?  Looks like trading in DELL has halted.  Is this just temporary or is this the first step in taking the company private?  Is my money stuck in limbo until I get cashed out?  Looks like the deal won't close for another 4 months.  I would prefer to have that cash available vs. making $13.65/$13.27 => 2.9% over that time-frame.

 

 

[txlaw]

And congrats to everyone who did well on DELL!  Wish it would have been even better.

[txlaw]

so did this end up being a good result or a bad result for most people that went in?  I imagine this price is very low compared to what you thought it was worth?

 

Basically, just wondering what the post-mortem is, assuming this goes through.

 

It was very good for me (thanks again, txlaw), but it should have been better.  I posted previously that I think the services business is worth $17-18bn.  This means that all of the software and hardware businesses are being sold for $6bn.  That's incredibly low.  Lenovo is worth $10bn, as a comparison.

 

Does anyone know how this works now?  Looks like trading in DELL has halted.  Is this just temporary or is this the first step in taking the company private?  Is my money stuck in limbo until I get cashed out?  Looks like the deal won't close for another 4 months.  I would prefer to have that cash available vs. making $13.65/$13.27 => 2.9% over that time-frame.

 

Agreed. 

 

It looks like they're truly valuing the EUC business as a cigar butt, without giving any credit to reinvestment opportunity.  I suppose if you're going to lever up the company, that's the conservative approach to take, as all of the cash flow will no longer be going to growing ES&S.  A good amount will go to paying interest and paying down the debt. 

 

I'm thinking DELL is just being temporarily halted.

[blainehodder]

This is robbery.  No wonder why Dell is a billionaire.

[boilermaker75]

so did this end up being a good result or a bad result for most people that went in?  I imagine this price is very low compared to what you thought it was worth?

 

Basically, just wondering what the post-mortem is, assuming this goes through.

 

It was very good for me (thanks again, txlaw), but it should have been better.  I posted previously that I think the services business is worth $17-18bn.  This means that all of the software and hardware businesses are being sold for $6bn.  That's incredibly low.  Lenovo is worth $10bn, as a comparison.

 

Does anyone know how this works now?  Looks like trading in DELL has halted.  Is this just temporary or is this the first step in taking the company private?  Is my money stuck in limbo until I get cashed out?  Looks like the deal won't close for another 4 months.  I would prefer to have that cash available vs. making $13.65/$13.27 => 2.9% over that time-frame.

 

Agreed. 

 

It looks like they're truly valuing the EUC business as a cigar butt, without giving any credit to reinvestment opportunity.  I suppose if you're going to lever up the company, that's the conservative approach to take, as all of the cash flow will no longer be going to growing ES&S.  A good amount will go to paying interest and paying down the debt. 

 

I'm thinking DELL is just being temporarily halted.

 

DELL is trading again.

[Guest valueInv]

Official press release:

http://www.dell.com/Learn/us/en/uscorp1/secure/2013-02-04-michael-dell-silverlake-acquisition

 

I'm very disappointed, despite having made a good amount of money on this idea.  MSD and Silver Lake are stealing the company, IMO. 

 

Sanjeev was dead on about how this would play out -- except that the buyout price is even worse than $14!

 

Well, I wish DELL luck going forward, as they are an important company to Austin, and I think they can do really cool things.  Too bad about how this went down, though.

 

"Shareholder friendly management", huh, Txlaw?

[Palantir]

Yay...high insider ownership by company founder with "skin in the game" creates value for shareholders!

[txlaw]

Official press release:

http://www.dell.com/Learn/us/en/uscorp1/secure/2013-02-04-michael-dell-silverlake-acquisition

 

I'm very disappointed, despite having made a good amount of money on this idea.  MSD and Silver Lake are stealing the company, IMO. 

 

Sanjeev was dead on about how this would play out -- except that the buyout price is even worse than $14!

 

Well, I wish DELL luck going forward, as they are an important company to Austin, and I think they can do really cool things.  Too bad about how this went down, though.

 

"Shareholder friendly management", huh, Txlaw?

 

Somehow I knew you would try to get a sucker punch in.  ;)  Where's Wellmont?  When is he going to drop some science on us (or on me)?

 

Dell has been shareholder friendly in that they've been very good at disclosing information to shareholders. But you are right -- ultimately, MSD stole the company. 

 

So I was wrong on that front.  I admit it.

 

You're still a total ass for making this post, though.

[VAL9000]

 

You're still a total ass for making this post, though.

 

ROFL

 

[hyten1]

someone should take ntdoy private :)

[oldye]

Michael Dell is a thief.