Can Silver Lake really turn Dell around?
Silver Lake was formed with the idea that it could invest in mature technology companies and somehow work magic with the most mature parts of the business.
One venture capitalist told the Financial Times that the private equity firm is the "undertaker" of the technology industry. Undertaking on this level has proven to be a strong business. The firm's third investment fund has generated a net annualized return of 17 percent as of the end of September. Its first fund was by far its best performer, with returns of 25 percent or so. Its second fund generated about 10 percent or so in annualized profits.
Silver Lake built a stellar reputation by dint of some notable winning investments. The best example may be Skype, which was bought by Microsoft for $8.5 billion, netting the investors about $5 billion. But will Dell prove to be a too challenging?
One executive tells the FT that, "It is fairly valued. It has already been through major cost-cutting. What would we do that Michael Dell hasn't already done?"
Is there anything that Michael Dell will do as the CEO of a private company as opposed to a public one?
He'll perhaps have to accept lower profits initially, for one thing, in a bid to invest heavily in the short-term, assuming he makes his LBO debt payments. Beyond that, the organic growth plan is unclear. Perhaps the Silver Lake crew has it all figured out already. This sort of skepticism is not new to them.
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