On October 29, 2013, Dell Technologies (DELL) What the company called “an exciting new chapter” has begun.
The computer maker was letting the world know that Chief Executive Michael Dell and private equity firm Silver Lake Partners had completed their acquisition of the company, which Dell founded in 1984 when he was 19 years old.
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It was a difficult time in Dell's history. In 2012, revenue was down 7% from the previous year and profits were falling, prompting Michael Dell to make a $25 billion takeover offer to shareholders that would take the company private.
“This transaction positions Dell to enter an exciting new chapter, continuing to execute on its long-term strategy and focusing on delivering world-class solutions to customers as a privately held company,” the company said. In a statement. .
“Under a new, privately held ownership structure, Dell will be even more flexible and entrepreneurial, allowing it to do what it does best: serve our customers with a unique purpose and drive innovations that help them achieve their goals,” Dell added.
Dell CEO highlights 'digital transformation'
The company, which went public in 1988, had been a member of the S&P 500 before the transaction, which was valued at about $24.9 billion.
Dell's existence as a private company would last until December 28, 2018, when the company resumed trading on the New York Stock Exchange after buying back shares that tracked the financial performance of software maker VMware.
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“Our world is undergoing a digital transformation that will change every aspect of how we live, work and operate as a society,” Michael Dell said in a press release.
“Dell Technologies was created to be the essential infrastructure company for this digital era, and with today’s announcement, we are aligning the interests of our shareholders to benefit from the integrated innovations and value creation of our entire family of businesses,” he said.
Dell, which celebrates its 40th anniversary this year, began a new chapter after S&P Dow Jones Indices said the company, along with Palantir (PLTR) and Erie's compensation (Erie) would join the S&P 500 on September 23.
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American Airlines (AAL) Etsy (Etsy) and Bio-Rad Laboratories (BIO) will join the S&P 400 mid-cap index.
Dell shares are up nearly 40% so far this year and 50% from a year ago.
In May, Dell introduced a series of ai-enabled PCs powered by Qualcomm processors and said a new Nvidia-compatible server (NVDA) The latest chips will be available in the second half of the year.
However, the shift to artificial intelligence caused disruption and on August 5, approximately 12,500 Dell employees working in the sales division were laid off as the company invested in a new group that will focus on ai products and services.
“We are becoming more efficient. We are streamlining management layers and reprioritizing where we invest,” two Dell sales executives, Bill Scannell and John Byrne, said in a memo to employees.
Executives also said the company aimed to rapidly drive growth by unlocking “the value of modern IT and ai.”
Analyst sees 'multiple catalysts ahead'
Shortly afterward, Dell beat Wall Street's earnings expectations for the second quarter as revenue rose 9% to $25 billion.
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“We are optimistic about the next PC refresh cycle as the installed base continues to age, Windows 10 reaches end of life late next year, and significant advancements in ai-enabled architectures and applications continue,” said COO Jeffrey Clarke. told analysts.
While stating that “progress will not always be linear in the early stages,” Clarke added that “we have the right ai portfolio with more to come, the right services capabilities and we are optimizing our sales coverage to take advantage of this once-in-a-generation opportunity.”
“I really like our hand,” he said.
Following the announcement of Dell's return to the S&P 500, analysts issued research reports. Among them was Citi's Asiya Merchant, who said Dell shares rose after the close on Friday following the announcement, according to The Fly.
Dell shares may continue to perform after the inclusion, given the “multiple other potential catalysts ahead,” including recovering general-purpose infrastructure demand, a PC refresh cycle through 2025, ai momentum and capital returns, said the analyst, who affirmed a buy rating on the stock with a $160 price target.
Susquehanna initiated coverage of Dell with a neutral rating and a $120 price target.
Dell has the scale, brand and internal financing arm to scale ai hardware for server applications, but the investment firm sees two risk factors that have driven its EPS estimates below consensus.
Susquehanna said the economics of ai hardware remain uncertain and the strategy for scaling ai services remains unclear.
The company's fiscal 2026 and fiscal 2027 EPS estimates of $8.57 and $9.40 compare to consensus of $9.40 and $10.87, respectively.
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