The price that something is worth is not what you can come up with in some spreadsheet, but rather the price that someone will pay for it. That was a hard lesson for Southeastern Asset Management (SAM) to learn when it heavily invested in Sun Microsystems before it was ultimately sold to Oracle, and this could turn out to be yet …
Wintel are Dead, so where is the strategy?
The only way to drum up profits now is in mobile and in Linux server systems. Windows is on the wane, and Intel still have no answer to ARM and are in dire straits as the PC market shrinks. MS have no answer to Android or even Chrome OS and on servers MS are being beaten up by leaner, meaner Linux systems.
MS have a finger in the DELL pie with a massive "Loan" aka a possible bribe to "do the right thing". So they will be pushing DELL away from Linux, Android, Chrome OS etc. From the POV of MS, their loan is an attempt to pump the chest of the dying OEM patient.
So there you have it. Dell are falling behind as the PC market goes softer than custard. And it is due to a lack of strategy that it's players are going to become relatively insignificant compared to today.
The mobile asteroid has hit and the dinosaurs are braying.
Why do you want WIntel to fail?
It's the reason we've got cheap computing hardware at all, take away the x86 platform and you're stuck in the mire of widely variant hardware - costing more and much harder to code for.
Heck, mobile and tablet is the first wave of "impossible to really code for" - you can write software for them but not on them, and having done so you must supplicate at the feet of Apple, Google, Amazon etc before you can sell it to anyone else. Even for free.
The death of WIntel is also the death of Linux and BSD - they need each other. Ok, Windows can afford to lose a lot of market share - but not all of it.
"Perhaps it is best to never go public at all and keep a majority stake of the company you founded"
agree. going public makes your company become the object of exploitation. Those wall street guys are doing a really nasty job.
The reports of my death have been greatly exaggerated
I'm writing this on a pc, in an office that uses hundreds of the things. Home PC sales may tank, except amongst gamers but those that predict the end of PC's in the workplace are deluded.
Yes mobile is growing, but mobile is how we play or seek distraction, it isn't how we do work.
SAM I am
Really, just waiting for someone to go Seussian here. It's gotta happen. And while I'm here, uh, why doesn't SAM just sell off here while the price is nice. I just don't get it. Then again, I don't understand the concept of money very well. Coinage: No problem. The abstract concept of money: Big problem. As in "My string of semi-random bits is equivalent to such and such gazillion dollars/pounds/euros/whatever" just really makes little sense. But that is how it works these days.
This reminds me of the Manchester United situation. The company was vastly undervalued by the stock market (which didn't understand it), and so the Glazers were able to buy it for a song, and invest almost none of their own money. While ending up owning all of it, after paying off the debts with the company's money. Except that due to their inability to get cheap enough credit they've struggled to make the deal work, but I suspect they'll make out with the moolah in the end.
There are only two real reasons to do a buyout like this. Either you've got a cunning plan Mr Blackadder to do something different, and thus make an enormous profit, which you obviously want to keep more of. Or the shares are going cheap, cheap, cheap - and you want to grab it while you can.
The problem is that the board, and Michael Dell, are going to look bloody silly if the shareholders torpedo the LBO and it all falls apart. Which means that Southwestern are in a bind, because the share price isn't likely to go up if the deal falls apart. So I guess the only answer is to put their money where their mouth is. If the company is only worth half the stated share price, then get buying. Or stop whining.
It does seem a bit odd that a company can use its own money to allow its management to buy it though. Makes it harder for any rival to be able to buy it, because they've got to cover extra money that the management buyout are getting from the piggy-bank. The advantage being that they'll actually have some working capital, whereas the management buyout seems to be spending all the working capital to buy back shares, and borrowing more from the banks.
Stop the drop
Dell's announcement of wanting to buy back shares at $14, has one main result - the stock price stabilizes at $14 instead of continuing the drop with the reduced sales. The banks will then give loans on that valuation of Dell - which means the stockholders get more money than if they let the stock slide on down.
That SAM for want more $ per share, is understandable, they probably paid premium. If the banks can be convinced to cough up more money for Dell, stockholders will be pleased.
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