Dell Corporation Harvard Case Solution & Analysis

TAKING DELL PRIVATE

1.      INTRODUCTION

Dell Corporation is the world’s third largest PC vendor after Lenovo and Hewlett & Packard (HP). Michael Dell is the founder as well as the present Chairmen and CEO of the company. With employee base of over 108,800 globally, the company is deemed as the largest and most technologically advanced corporations in the world (Reuters, 2013). Dell Corporation is an American company that has firm roots globally, based in Round Rock, Texas, US. Founded by Michael Dell in 1985, Dell Computer Corporation deals in technology based products such as PCs, servers, peripherals, cameras, printers, software and hardware, HDTVs, MP3 players and market products from other manufacturers.

Dell does not only deal in selling its products to individual customers, but its customer base includes corporations and government sectors. It offers a diversified range of line of desktop and notebook PCs along with assisting in assert recovery, financing, infrastructure consultation and support, system integration and training and a host of information technology service through its service’s unit. In September 2013, Dell announced that it was getting privatized in a deal that was valued at $25 billion (Hoovers, 2013). With a worldwide established reputation for low cost and technologically advanced products, in the fiscal year 2013 Dell has accumulated $56.94 billion revenues, $3.01 billion and $2.37 billion in operating income and net income respectively (Fortune 500 Magazine, 2013).

Dell Corporation envisions itself to become the number one PC vendor in the world. Not only it wants to establish its feet as the number one vendor of technology globally, but it also wants to become a low cost leader. In addition, it wants to become the guiding force for future. Dell wants to become the most successful computer company in the world, delivering high profile customer experience, and meeting customer’s product related expectations. With its competitive pricing model, Dell delivers up to date technology that helps it recouping with its low cost products. According to one estimate, although Dell sells at a low price, but it has a high average price in the industry. Dell does not only envision itself to become a low cost leader but also wants to manage superior quality corporate citizenship and financial stability.

At present Dell Corporation has a strategic objective of being developing SKUs, which are the most popular configurations of the time. This configuration is the build to order model, which reduces inventory levels and which has helped Hewlett Packard and Compaq, who are its competitors to achieve efficiency. In addition to this, Dell now aims at offering its products at a more competitive price by broadening its portfolio and optimizing its distribution channels. Dell’s Wyse business that is cloud computing by nature is more valuable than their hardware business (Press-release 2012). The paper aims at exploring Dell Corporation situation in which the company is planning privatization.

2.      CASE BRIEF:

1.      Description of the situation

With the changes in the industry in the mid of 2000s, despite of its successful business model (internet sales) Dell was posed threat by PC vendors in the world. The three changes were; declining demand for PC customization, the retail channel for subject to consumer sales rushes, and growth of PC market in the emerging economies. Dell tried to restructure its model to meet the changing trends in industry, but it failed (Collis, Yoffie, & Shaffer, 2013). With the declining net income of $2.4 billion in 2012 from $3.6 billion in 2005, and the bearish trend in the stock price (declining to as low as 60%) pressurized Michael Dell the CEO and founder of the company to meet representative of Silver lake Partners in order to explore Dell’s privatization. The company which Dell founded in his dorm room and which paved its way to be one of the youngest Fortune 500 companies in history was now planning to buy out its shares from the market. The PC market was becoming lucrative due to competition faced from low cost Asian competitors e.g. China (Collis, Yoffie, & Shaffer, 2013).

In addition to this, the longer turnover rates in the PC market and the rising demand for tablets and smart phones made it tough for Dell to compete publicly. Therefore, Dell is transforming its core Dell into New Dell, which will be Enterprise Solution and Software based. By 2013, the board of directors at Dell, and all of the company’s shareholders needed to decide whether to accept Michael Dell’s offer to take the company private at $13.65 per share. Dealing with this entire nuisance, Dell confronted an accusation from Carl Icahn, who was a large stakeholder at the company (Collis, Yoffie, & Shaffer, 2013). He accused Dell Inc. of stealing the company, and pressurized other shareholders to ask for a leveraged capitalization. With this dilemma confronted with other environmental factors, Michael Dell needed to take a step tactfully by deciding on to an optimal decision that would help in privatization along with holding shareholders’ support (Collis, Yoffie, & Shaffer, 2013)...................

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