[adventureful]

How much of Dell's business is low margin PC manufacturing today? Their stated intention is to continue moving heavily toward an IBM style services model rather than remain so dependent on computers. I'd place my bet on Dell being worth a lot more than $20 billion in the future, or a lot less. They can afford to fund their way into a very large services business and the PC biz should continue to supply cash for a while.

Michael Dell is worth $16 billion on his own. In talking about him taking it private, I was assuming he'd lean into it extremely heavily (putting most of his net worth at risk). And obviously he very well might have no desire to do such a thing at nearly 50 years of age.

Even if Michael Dell used $10b of his wealth, financed $10b of it with Dell's cash, and then got $10b in private equity, it would be extremely doable at a $30b take out price (or less given the very bearish sentiment on the stock).

If Michael Dell wanted to, I think he could take the whole thing out himself (leveraging the company cash ultimately as well). He currently owns around 12% of the company ($13.5x billion in wealth outside of Dell stock). In the current market weakness, he could probably gradually consume another 8% to 13% of the stock without hardly moving the price.

[Snail_Commando]

Apparently, about 80% of Dell revenue comes from product(PCs, peripherals, servers, and some consumer electronics.) The remaining 20% or so comes from services (including software.)

What I was trying to say is that I don't really see what incentive Dell Inc. would have to go private.

I don't see why Micheal Dell would assume so much risk, and I don't really see the immediate benefit for any party (Micheal, the board, shareholders, PE firms) to privatize at the moment.

They should focus on their transition instead of burning up so much cash on hand and assuming a lot of risk.

I think the best bet would be to stay public and try to scale their enterprise segment through venture investment.

[adventureful]

It's not that Dell would have an incentive to go private, it's that it would have no choice with Michael Dell bearing down on it, as the CEO and chairman of the board and owning 12% with overwhelming capital at his disposal. A 50% premium offer on the stock would probably more than hook institutional investors to bail out.

Michael Dell would buy it because it's crazy cheap (remove the cash discounted for 'real' liabilities and it has a 3.x pe ratio), and has a very long, very successful track record of profitability. If I'm not mistaken, it's basically had only a couple of quarters of unprofitable operation in the last 19 years (there was one in 1993).

He could plausibly earn back his $15 billion in cash in five or six years and own the entire company outright thereafter, with a potentially very good upside if they successfully transition to a services company. He's also young enough at 47, to still operate it for at least another 15 plus years with no big deal.

It's understood this is a very very very very unlikely scenario. Nobody likes to put $16 billion at such risk.