Wry & Dry

For whom the Dell tolls

Readers will remember Dell Corporation as a sort of bespoke and amazingly successful desktop computer manufacturer.  It was the number one PC manufacturer in the world for 10 years.

But nothing lasts forever.  It's all about competition: HP, Lenovo and others were building cheaper and better machines.  And HP and Amazon were eating Dell's data storage lunch.  Dell responded by taking itself 'private' - its Founder, Michael Dell, and some buddies paid 5 times EBITDA (Earning Before Interest, Taxes, Depreciation and Amortisation) to take it out of the the hands of the public.  At that time sales had dropped 8% and profit a somewhat disturbing 32%.  And this in the booming tech business.

Well, rather than invest in exciting new products and services, the company has embarked upon the largest tech deal ever, a $67 billion buyout of data storage company, EMC.  And that is at 12 times EBITDA.  Hefty.

Some salivating lips in Wall Street gurus are sensing a mix of $40b debt and $27b equity.  Which means about $700m in fees.

Nice work, if you can get it.