Dell: stake sell
Will going private revive the PC maker’s fortunes?
Round Rock, Texas-based Dell Inc., the third-largest PC maker globally, is discussing the possibility of a potential buyout with private equity firms. Top private equity firms such as TPG Capital and Silver Lake are reportedly discussing the deal with Michael Dell, the chief executive and founder of the company who owns about 15% stake in Dell. For several years now the computer maker has been losing value and market share and has been struggling to regain its position in the PC market. The personal computer business remains Dell’s bread and butter, bringing in 70% of revenues. But as tablets, smartphones and other mobile devices have eaten away at PC sales, shares of the firm have struggled. Over the last five years, Dell’s shares have fallen by 43%, sinking into the single digits by the end of 2012.
To revive growth and cope with competition Michael Dell, who retook the CEO position in 2007, has been considering taking the company private. Dell’s enterprise value of $19.1 billion is 4.4 times earnings before interest, taxes, depreciation and amortization for the last 12 months, according to Bloomberg. That’s a lower valuation than every computer-hardware maker larger than $1 billion, except Hewlett-Packard Co, which has a multiple of 3.5, the data show. But Dell’s net cash balance of $5.15 billion provides some downside buffer as it produces opportunity for a leveraged buyout under the right conditions.
The buyout, if and when it takes place, could actually be one of the largest deals in the technology space since 2007, when KKR & Co bought First Data Corp for more than $25 billion. A buyout can be good for a company even it means investors aren’t able to trade its stocks. Entering into private ownership could amount to more maneuverability for Dell as it tries to stay afloat in a terrain full of pitfalls for PC makers.
Rio Tinto: CEO EXIT
Bad bets force head honcho to quit
In the latest string of exits forced upon leaders of the world’s biggest mining companies, Tom Albanese, the CEO of the London-based minerals explorer Rio Tinto has been replaced by the company’s iron ore boss Sam Walsh. Albanese resigned over a $14bn writedown involving two of his most significant acquisitions, Mozambican coal mining and the Alcan aluminium group. The bulk of the writedown, between $10 billion and $11 billion, relates to aluminum assets acquired in 2007, while the remaining $3 billion is for Mozambique coal operations acquired only two years ago. Albanese has admitted ‘accountability’ for the loss of assets following the bad deals. Prices for metals and their ingredients have fallen sharply over the past several years with the sharp tempering of demand for mineral resources in China, Prices for coking coal have dropped 43% since 2011, when Rio Tinto made its Mozambique move. Aluminum prices have dropped 22% since 2007. At least 20 mining CEOs have stepped down in the past year under pressure from investors and boards, who blame the executives for costly mining projects that were conceived during the commodities boom.
Will going private revive the PC maker’s fortunes?
Round Rock, Texas-based Dell Inc., the third-largest PC maker globally, is discussing the possibility of a potential buyout with private equity firms. Top private equity firms such as TPG Capital and Silver Lake are reportedly discussing the deal with Michael Dell, the chief executive and founder of the company who owns about 15% stake in Dell. For several years now the computer maker has been losing value and market share and has been struggling to regain its position in the PC market. The personal computer business remains Dell’s bread and butter, bringing in 70% of revenues. But as tablets, smartphones and other mobile devices have eaten away at PC sales, shares of the firm have struggled. Over the last five years, Dell’s shares have fallen by 43%, sinking into the single digits by the end of 2012.
To revive growth and cope with competition Michael Dell, who retook the CEO position in 2007, has been considering taking the company private. Dell’s enterprise value of $19.1 billion is 4.4 times earnings before interest, taxes, depreciation and amortization for the last 12 months, according to Bloomberg. That’s a lower valuation than every computer-hardware maker larger than $1 billion, except Hewlett-Packard Co, which has a multiple of 3.5, the data show. But Dell’s net cash balance of $5.15 billion provides some downside buffer as it produces opportunity for a leveraged buyout under the right conditions.
The buyout, if and when it takes place, could actually be one of the largest deals in the technology space since 2007, when KKR & Co bought First Data Corp for more than $25 billion. A buyout can be good for a company even it means investors aren’t able to trade its stocks. Entering into private ownership could amount to more maneuverability for Dell as it tries to stay afloat in a terrain full of pitfalls for PC makers.
Rio Tinto: CEO EXIT
Bad bets force head honcho to quit
In the latest string of exits forced upon leaders of the world’s biggest mining companies, Tom Albanese, the CEO of the London-based minerals explorer Rio Tinto has been replaced by the company’s iron ore boss Sam Walsh. Albanese resigned over a $14bn writedown involving two of his most significant acquisitions, Mozambican coal mining and the Alcan aluminium group. The bulk of the writedown, between $10 billion and $11 billion, relates to aluminum assets acquired in 2007, while the remaining $3 billion is for Mozambique coal operations acquired only two years ago. Albanese has admitted ‘accountability’ for the loss of assets following the bad deals. Prices for metals and their ingredients have fallen sharply over the past several years with the sharp tempering of demand for mineral resources in China, Prices for coking coal have dropped 43% since 2011, when Rio Tinto made its Mozambique move. Aluminum prices have dropped 22% since 2007. At least 20 mining CEOs have stepped down in the past year under pressure from investors and boards, who blame the executives for costly mining projects that were conceived during the commodities boom.
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