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Dell goes private in $24 billion buyout

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Dell will be taking its stock off the public market in a $24.4 billion buyout as it struggles with slumping demand for personal computers.

The agreement between company founder and chief executive Michael Dell and the Silver Lake Partners investment firm was announced Tuesday and includes a $2 billion chip-in from Microsoft, which counts Dell as one of its most important partners.

But the move may ruffle feathers among other manufacturers who produce Windows PCs. Dell is the world’s third-largest PC maker, according to research by the International Data Corp., behind HP and Lenovo.

The trend toward mobile phones and tablets has hit companies like Dell particularly hard, as consumers are snapping up the smaller devices for on-the-go computing in favor of Dell’s core low-cost laptops and other computers. In 2012, the PC market faced its first year-over-year holiday sales decline in five years, according to a IDC. Dell has released some tablets running Microsoft’s Windows RT operating system, but most of its focus has remained on the shrinking PC business.

Michael Dell said in the announcement that by taking the company private he can give it the “time, investment and patience” to work out its next steps. He will remain the company’s chief executive.

Under the deal, Dell stockholders will receive $13.65 per share in cash, and the company can solicit other proposals for 45 days.

Microsoft’s contribution to the deal has faint echoes of its partnership with Nokia, which gave the Redmond, Wash., firm a go-to hardware partner for its Windows Phone 8 system. While the agreement announced with Nokia in November is very different from Microsoft’s move with Dell — Microsoft told All Things Digital that it will stay out of daily Dell operations — the firm’s stake in Dell could make its other partners a bit wary. Several had already raised some concerns when Microsoft launched its own Surface tablet last fall that their own efforts would play second fiddle in Windows tablet promotion.

ZDNet’s Mary Jo Foley wrote that while Microsoft has certainly given some preferential treatment to its partners in the past, it has backed off of full-blown Nokia promotion in recent months. In fact, the company even announced earlier Tuesday that it has tapped Huawei, not Nokia, as its partner for a device aimed at the growing smartphone market in Africa. It could be that Microsoft’s investment in Dell just makes Dell a stronger partner for Microsoft, Foley said.

That's certainly how Microsoft is spinning it. The company said in a statement that it considers its part in the Dell deal a show of support for a partner who is “committed to innovating and driving business for their devices and services built on the Microsoft platform.”

But competitor HP threw down the gauntlet in a statement about the deal on Tuesday, predicting that Dell would “leave existing customers and innovation at the curb.”

“Dell has a very tough road ahead,” the company said. “We believe Dell’s customers will now be eager to explore alternatives, and HP plans to take full advantage of that opportunity.”

Related stories: Dell seals $24.4 billion deal with founder, investment firm to go private Microsoft and Huawei launch phone aimed at growing African phone market Microsoft risks straining PC partnerships with Dell investment Sign up today to receive #thecircuit, a daily roundup of the latest tech policy news from Washington and how it is shaping business, entertainment and science.

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