I have often heard Michael Dell talk about how his company hasn't gotten enough credit for all of the terrific things it does BESIDES make personal computers. His company did trade like a pure hardware company, as if it offered nothing beyond the box and for anything else you needed another company in there helping.
These days, when you need a solution you don't think of Dell. But a lot of municipalities and smaller to medium-sized businesses do. Michael Dell says that Dell is about trying to help them while the bigger companies, the ones offering integrated software and hardware soup to nuts like Oracle (ORCL) and Hewlett-Packard (HPQ), aren't as interested in their business.
You take the company private and maybe you can position it as one that has more of a consulting shining crown and less of a secular declining personal computer business. It can offer storage deals and it can offer security deals and all sorts of other big-data retrieval help that is proprietary. Yes, Dell's been stung by a lack of a tablet product. But maybe newly-found investor Microsoft (MSFT) can help there because other companies, notably Hewlett-Packard, are trying to do their own tablet and don't welcome Microsoft's competitive entry into the market.
Virgin Media's a case where, like Dell, the cash flow is consistent and growing. It looks to me like they don't cut the cable cord in Europe either, even when times get tough, but the valuation is off kilter vs. the franchise. This deal affords a way to bring out value, although I have to point out that you do have a double since last Summer's low point related to European woes.
Of course these aren't just deals driven by Michael Dell and the current management of Virgin Media. You are getting the smartest guy in the industry, John Malone of Liberty Global, driving the bus on the Virgin Media deal. Malone always makes money for his partners, but also, more importantly, his shareholders.
We've got Glenn Hutchins and Silver Lake ponying up for the massive $25 billion deal that is the going-private transaction of Dell. Again, Silver Lake is a very smart buyer, if not the smartest, and that private equity company has purchased some of the most distressed tech companies out there and made them work.
What does this say about the whole market when you can get these two deals the same day? To me it says that there are plenty more targets out there, targets that are a lot more undervalued than Dell and Virgin Media. Dell was at $9, but it has been down for years and years. But Virgin Media had shot up like a rocket and has been outperforming so many other companies in the business. I like the fact that Malone must believe either that Europe is healing or that it will heal, because if it were still declining and the wealth going away you don't want to own a cable company levered to the continent.
Let's not forget that if you add in the very big tech deal, Acme Packet (APKT), yesterday, you have two tech companies that were regarded as undervalued by Michael Dell and Larry Ellison, two of the deacons of tech, and a third, considered undervalued by the smartest guy in the cable and, some would say, media industry.
Talk about verification of this move. How about maybe that the move's still in its infancy because of the values that have been left behind by the state of the world in general?
Three deals. Three bulls in Ellison, Dell and Malone.
Three knowledgeable buyers who have a history of doing the right thing.
I like it.