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Michael Dell Risking It All On The Table!

In 2004, Michael Dell announced his retirement from the CEO role, having grown Dell into a multi-deca billion dollar company synonymous with affordable computers worldwide. However, the next decade was tough for Dell, as Asian manufacturers like Asus, Acer, and Lenovo exploded in popularity, annihilating Dell’s profit margins by 72%. Michael, still worth $15 billion, decided to delist the company by borrowing $19.4 billion and taking the entire company private. This risky move made history as the largest technology leverage buyout of all time.

Michael’s decision to take Dell private was the only option he had left. He had come out of retirement in 2007 at a time when Dell was rapidly losing market share to HP and Asian PC makers. Michael believed that the best strategy was to focus on software and services as opposed to hardware. He went on a $10 billion buying spree in the late 2000s, including acquisitions like Perot Systems for $3.9 billion in 2009. Within five years, Dell turned a $10 billion investment into non-PC businesses into a $21 billion business.

However, the market didn’t care about Dell’s shrinking market share and declining profits, leading to poor investor sentiment. Dell’s second biggest shareholder, Southeastern Asset Management, offered to sell their entire stake for the right price, prompting Michael to consider taking Dell private. Despite the odds, Michael managed to turn around Dell and grow his fortune from $15 billion to $86 billion.

Michael met legendary private equity investor Egon Durban at a tech conference. Egon had researched Dell and believed that Dell was already an enterprise company, and he was willing to back the move with $20 billion. However, Carl Icahn, a corporate raider, was a target for Dell. Icahn, a seasoned corporate raider, was convinced that someone willing to put $20 billion and eventually $70 billion into a declining $25 billion business was up. He purchased a $1 billion stake in Dell and launched his own takeover bid, becoming Dell’s 2nd largest shareholder. Icahn’s message to investors was clear: whatever Michael was willing to pay to take Dell private, he was willing to pay more. Icahn even offered a $10 million sign-on bonus to a tech executive, possibly Compaq CEO Michael Capellas.

Michael eventually took Dell private on October 30, 2013, and it became the world’s largest startup. With a 75% stake, Michael had to answer to himself and make the pivot of a lifetime. To keep the consumer PC business relevant, Michael slashes margins to 0 and switches to a build-to-inventory approach. This move not only wiped out Dell’s profits but also allowed Dell to compete against Asian manufacturers and keep the brand relevant within the consumer space.

Michael decided to build a new business that could pay for everything. He decided to go big by acquiring EMC, a massive enterprise business that was facing pressure from investors to spin off VMware. EMC was too big for Dell, and they wanted to save their best asset, VMware. Michael was interested in being that savior, but EMC was much bigger than Dell. To unite the two companies, Dell would buy EMC and buy out all of their investors, who were bullish on VMware.

In 2016, Michael borrowed $48.6 billion to acquire EMC. Both companies have since regained profitability, survived massive debt payments, and become strong, profitable public companies. VMware, a company specializing in virtualization software, has exploded due to the cloud market’s exploding demand. Dell paid $635 million for VMware, which is now worth $92 billion. Broadcom acquired VMware for $69 billion, and by the time the deal closed, Broadcom stock had appreciated so much that the deal was now worth $92 billion.

Michael Gamble paid off, saving his consumer business, establishing a giant enterprise business, and netting an extra $70 billion for himself and his creditors. Today, Michael stands at $86.6 billion and is on track to cross $100 billion, a feat only accomplished by tech peers who founded companies 20–30 times the size of Dell.

Written by Nouriel Gino Yazdinian Image Courtesy of  mikeandryan

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