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Dell taken private in $24 billion buyout

SAN FRANCISCO -- Dell Inc., the world’s third-biggest maker of personal computers, is going private in a deal valued at $24.4 billion, undertaking the biggest leveraged buyout since the financial crisis.

Chief Executive Officer Michael Dell and Silver Lake Management will pay $13.65 a share, the companies said Tuesday in a statement. That’s 25 percent more than the closing price of $10.88 on Jan. 11, the last trading day before Bloomberg News reported the discussions.

Michael Dell is taking back majority control of the company he started almost three decades ago.

The stock has lost more than half its value since January 2007, when Dell resumed his role as CEO, amid investor dismay with management’s failure to cope with upstart competitors in mobile and cloud computing.

By going private after a quarter-century as a publicly traded company, Dell is seeking more leeway to cut jobs and adopt strategy shifts needed to court high-margin customers spending billions on data centers.

“They obviously see the writing on the wall,” said Daniel Morgan, a senior portfolio manager at Synovus Trust Co. in Atlanta. “They understand what the challenges are and realize they need to refurbish what they are doing.”

Even as being private shields Round Rock, Texas-based Dell from answering to public stockholders on a quarter-by-quarter basis, it subjects the company to new constraints, including the addition of debt.

Following the transaction, Michael Dell will be chairman and chief executive, maintaining “significant equity,” according to the statement.

Microsoft Corp. is contributing $2 billion, according to the statement. Silver Lake, a technology-focused private-equity firm, was working with partners to line up about $15 billion in funds for the buyout, people familiar with the matter have said.

Dell, which trails Hewlett-Packard Co. and Lenovo Group Ltd. in the PC market, was halted in U.S. trading. Its stock plummeted 31 percent last year as it struggled to adapt to the industry-wide shift to smartphones, tablet computers and cloud computing services.

Consumers and companies are shunning PCs in favor of mobile devices made by Apple Inc. and Samsung Electronics Co., and Dell lags behind Oracle Corp., Cisco Systems Inc. and International Business Machines Corp. in data-center hardware, software and services.

Dell has seen its fortunes rise and fall since holding an initial public offering in 1988.

CEO Dell, who founded the company with $1,000 in 1984 in his University of Texas dorm room, was viewed as an industry wunderkind, demonstrating that he could sell complex products more efficiently and conveniently than was thought possible.

By cutting out middlemen and honing manufacturing so companies and consumers got exactly the PC configuration they wanted, Dell grabbed share and piled up profit even with lower operating margins than rivals such as IBM and Compaq Computer Corp., fueling an almost two-decade boom. Eight years after the IPO, Dell’s stake was worth more than $1 billion.

Dell ceded the CEO role to Chief Operating Officer Kevin Rollins in 2004, only to come back to the helm in 2007 after the company lost its top PC spot to Hewlett-Packard and earnings fell short of estimates. The company was also beset at the time by an accounting scandal that later resulted in a $100 million settlement with the U.S. Securities and Exchange Commission.

Since his return, Dell has talked publicly about “pruning” his PC business while using the cash it generates to snap up companies in computer networking, storage and enterprise software. Global PC sales fell 3.5 percent last year, to 352.7 million units, market researcher Gartner Inc. said. Dell’s market share fell 12.3 percent, to 10.7 percent.

Those declines are reflected by falling profit. Dell will earn $2.98 billion excluding some items in fiscal 2013, compared with $3.49 billion in 2012, according to analyst estimates compiled by Bloomberg.

Peter Burrows and Ian King of Bloomberg News in San Francisco contributed to this article.

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