Dell to go private in bid to dump ailing PC business

IT suppliers

Dell to go private in bid to dump ailing PC business

Cliff Saran

Dell is set to exit the PC business and reinvent itself as an IT services provider through a private equity firm buyout.

According to Bloomberg, private equity firm Silver Lake is in talks with Dell to take the company private in a deal valued at up to $22bn. This would enable founder Michael Dell to tackle core problems with the company in its current form, namely the poorly performing PC business.

According to Gartner, worldwide PC shipments totalled 90.3 million units in the fourth quarter of 2012, a 4.9% decline from the fourth quarter of 2011, due to tablets being used as alternatives to laptops and desktop PCs

IDC’s market data shows Dell’s market share dropped 20% in the fourth quarter of 2012 .

In 2010, Leo Apothekar, who was then CEO at HP, tried a similar move at the ailing server and PC business, by announcing HP would sell off its PC business. He was ejected from the company and replaced by Meg Whitman to restore investor confidence at a time when the company was the number one PC supplier.

But both Dell and HP have been affected by IT consumerisation, which has seen their respective market share figures slide. In addition, businesses no longer see a desperate need to upgrade PCs regularly, which has led to a decline in the corporate PC market at both companies.

Unlike HP, Dell’s services division is relatively small. HP spent $13.9bn in 2008 acquiring EDS, which had a global services footprint. Dell acquired Perot Systems, a company that specialises in US healthcare, in 2009 for $3.9bn.

According to industry experts, the $22bn Dell buyout will be the biggest in the history of the IT industry.

 

 


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