As PC shipments worldwide dipped in 2012 with Gartner reporting that worldwide PC shipments totaled only 90.3 million units in the fourth quarter of 2012, down 4.9 percent from year-earlier levels, hardware major Dell Inc. has spotted few opportunities to turnaround its business. Reports indicate that Dell is now closing in on a deal with private equity group Silver Lake Partners seeming the most likely candidate to acquire the business. Dell has been talks with Silver Lake and TPG.
Silver Lake is apparently arranging some $15 billion to finance the deal - one of the biggest in history and the largest contemplated since the last buyout bubble burst in the second half of 2007. Financing of the deal was seen as a big challenge considering that industry experts had expressed their apprehensions over banks' willingness to finance a large deal like this involving a company that is facing huge challenges in its core business. PC industry is faced with increasing challenges as consumers transition to smartphones and tablets.
CEO Michael Dell, who owns 15 percent of the company's stock, perhaps knew that the company could not have retained investor interest in its business unless it reinvented itself in keeping with the new IT hardware trends and consumer preferences.
Some industry quarters have also questioned the wisdom of a buyout of the company, considering that Dell has been making a push into enterprise offerings in recent years with reasonable success. Enterprise offerings give significantly higher gross margins compared with hardware business.
It appears that Dell lost out in its business as it primarily focused on cheap computers instead of innovative ones. Excess focus on supply chain management and streamlining left the company with limited attention on creating new computing experiences.
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