Michael Dell DELL -2.64%is close to finishing a risky $23 billion deal to take private the computer company he founded nearly 30 years ago, in an effort to remake Dell Inc. for a post-PC era.
Late Monday, Mr. Dell was in talks with Microsoft Corp. MSFT -1.75%and private-equity firm Silver Lake Partners to offer shareholders between $13.50 and $13.75 a share, said people familiar with the matter, about a 25% premium to Dell's stock price in January before the possibility of a deal became public.
The buyout, if approved by shareholders, would be the largest such deal since the financial crisis.
It also would be an admission by Mr. Dell that he wasn't able to pull off the changes needed to improve his company's revenue and profit under Wall Street's glare. The buyout would give Mr. Dell the largest stake in the company, ensuring that the 47-year-old is the one who gets to oversee any changes.
The Round Rock, Texas, firm once boasted a market capitalization above $100 billion as the world's largest PC maker. But the company's market share has since dwindled to third behind Hewlett-Packard Co. HPQ -1.70%and Lenovo Group Ltd. 0992.HK -1.70%as tablets and smartphones became more popular.
Mr. Dell has also had to endure critical comparisons of the financial performance of his company and Apple Inc., AAPL -2.49%a matter of particular frustration, according to people familiar with the matter.
Interviews with current and former Dell executives, plus other people who know the CEO, paint a picture of a man who appeared increasingly worried about his legacy. These people said it has been years since Mr. Dell showed the enthusiasm he did when he reclaimed the title of CEO in 2007 after a short period where he served only as chairman of the PC maker.
Mr. Dell didn't respond to a request for comment. A spokesman for the company declined to comment.
Dell shares slipped 2.6% Monday to $13.27 on the Nasdaq Stock Market NDAQ -0.98%.
As part of the deal to go private, Mr. Dell would contribute his nearly 16% stake valued at about $3.7 billion, plus $700 million from an investment firm he controls, the people said. Microsoft would invest about $2 billion in the form of a subordinated debenture, a less-risky investment than common stock.
Microsoft isn't expected to get board seats or governance rights in a closely held Dell, one of the people said. Instead, the companies would tighten their relationship regarding use of Microsoft's Windows software, the person said.
Silver Lake Partners would invest more than $1 billion. Four banks are expected to arrange about $15 billion in debt to help fund the deal, and each would handle about a quarter of that amount, one of the people said.
The move to take the computer maker private is as much about Dell the man as Dell the company. "It's pretty simple: His name is on the door," one former company executive said of Mr. Dell.
When Mr. Dell, who started the company in 1984 in his dorm room at the University of Texas, returned in January 2007, he promised to reposition the company for the new age.
Mr. Dell brought in several new executives, including ones to run operations, marketing and lead Dell's consumer push. But while sales grew during Mr. Dell's first year back, he couldn't sustain the momentum. The operations and marketing chiefs left after less than two years. The consumer chief left in 2010, after failed attempts at music players, phones and high-end laptops.
Mr. Dell began taking a step back from public scrutiny. In 2011, he stopped making prepared remarks on Dell's earnings calls, leaving that to his finance chief and other lieutenants.
Mr. Dell still dominated operational reviews, said people who attended the meetings, and he sometimes appeared to focus more on minutiae than big strategic decisions. Several years ago, Mr. Dell wrote a four-page memo after he first played with the XPS One, a high-end desktop that embedded all its parts inside the monitor. Mr. Dell's notes, sent late the night he received the machine, included his thoughts on the Styrofoam used to package the computer.
By late 2010, Mr. Dell had largely abandoned his efforts to develop products for consumers and advocated a new path to become a one-stop shop for businesses. He spent billions acquiring makers of security software, storage systems and other products, with an eye toward reinventing itself as a smaller International Business Machines Corp. IBM -0.68%
The products for businesses have a higher margin than PCs, but so far haven't been able to offset declines in the PC business, which still accounts for half of Dell's annual $62 billion in revenue. Overall, PC sales dropped 13% in the first three quarters of the company's fiscal 2013. Total revenue was down 7% over that period.
While Mr. Dell hasn't said what he might do with a closely held Dell, analysts said Dell now has most of the pieces it needs to become a one-stop technology shop. But it has to make those pieces work together, both technologically and organizationally.
A private Dell could focus on that and possibly exit some lower-margin parts of the PC business, such as retail sales to consumers, they said.
Mr. Dell has tried to position Dell as something other than a PC company, pointing out that the machines account for just a third of Dell's profits.
The people who have worked with him expect some changes to the PC business, but don't anticipate Mr. Dell will stop making PCs altogether.
Indeed, Mr. Dell has appeared wedded to PCs. When Hewlett-Packard briefly considered spinning out its PC business in 2011, Mr. Dell in private conversations derided the idea as a big mistake.
Mr. Dell has said that some of the PC industry's changes caught him unaware.
When asked in a 2011 interview with The Wall Street Journal what surprised him most since he returned as Dell CEO in 2007, Mr. Dell said the rise of tablets had been unexpected for him.
"I didn't completely see that coming," he said, before adding that he didn't anticipate business users would give up PCs soon. | 