Click here to close now.

Welcome!

BigDataExpo® Blog Authors: Liz McMillan, Adrian Bridgwater, Elizabeth White, Pat Romanski, William Schmarzo

News Feed Item

Fitch: Dell LBO would Exacerbate Existing Challenges

Fitch's 2013 technology outlook released last week stated that speculation around a Dell leveraged buyout (LBO) would re-surface in 2013 but would unlikely be consummated for several reasons. Since our outlook, press reports indicate that a deal may well be on its way. We believe that should an LBO occur, and keeping in mind that there are a number of different financing scenarios, an issuer default rating in the single -'B' category would be likely.

Depending on the structuring, we believe gross leverage could be between 3.5 times (x) to and 4.5x assuming repatriation of a large portion of Dell's international cash. Leverage could be approximately 1.0x higher should the company seek to raise debt secured by portions of the international cash (as some media outlets have speculated).

We would expect the basis for any going-private transaction would revolve around transforming the company into a smaller, higher margin business over the next three-to-five years that would command a higher enterprise value multiple upon exit than its currently being awarded value in the public equity market.

Dell, led by David Johnson (the recently departed head of corporate strategy), has done a solid job of building a portfolio of higher margin end-to-end enterprise solutions of security, networking, storage, and IT management tools. Despite these higher- margin businesses, execution to date has been relatively nascent relative to the company's overall size. High leverage would greatly limit the company's flexibility to address challenges in the highly competitive and evolving technology industry. Dell will continue to face formidable competitors, such as EMC, IBM, Cisco, Oracle, Accenture, HP, and others, all of which will have far greater financial flexibility, should an LBO be completed.

Dell's ability to repatriate its significant offshore cash is a critical determinant in the LBO decision, as it greatly influences the expected rate of return on the transaction and the vast majority of Dell's cash is held offshore. In addition, we have historically stated that a portion of Dell's cash balance is directly tied to the company's negative working capital balance, which results in significant cash usage when revenues declines. Therefore, we believe Dell needs to maintain an adequate cash cushion to offset this liquidity risk, particularly given the weak macro environment and continued poor performance of the company's PC business.

Dell has spent the last several years expanding its financing business beyond the core U.S. market into Canada and Europe. We would require additional clarity around the company's long-term plans in this area, as it would be impossible to finance this business at the corporate level with a sub-investment investment-grade rating without third-party help. The inability to offer financing would place the company at competitive disadvantage.

We fully expect existing unsecured bonds to be subordinated by any potential LBO transaction. The bonds do not contain change of control covenants and the limitation on liens covenant is generally weak for bondholders.

Additional information is available on www.fitchratings.com.

The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article, which may include hyperlinks to companies and current ratings, can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.

More Stories By Business Wire

Copyright © 2009 Business Wire. All rights reserved. Republication or redistribution of Business Wire content is expressly prohibited without the prior written consent of Business Wire. Business Wire shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

@BigDataExpo Stories
SYS-CON Events announced today that BMC will exhibit at SYS-CON's 16th International Cloud Expo®, which will take place on June 9-11, 2015, at the Javits Center in New York City, NY. BMC delivers software solutions that help IT transform digital enterprises for the ultimate competitive business advantage. BMC has worked with thousands of leading companies to create and deliver powerful IT management services. From mainframe to cloud to mobile, BMC pairs high-speed digital innovation with robust...
Amazon and Google have built software-defined data centers (SDDCs) that deliver massively scalable services with great efficiency. Yet, building SDDCs has proven to be a near impossibility for companies without hyper-scale resources. In his session at 15th Cloud Expo, David Cauthron, CTO and Founder of NIMBOXX, highlighted how a mid-sized manufacturer of global industrial equipment bridged the gap from virtualization to software-defined services, streamlining operations and costs while connect...
The Industrial Internet revolution is now underway, enabled by connected machines and billions of devices that communicate and collaborate. The massive amounts of Big Data requiring real-time analysis is flooding legacy IT systems and giving way to cloud environments that can handle the unpredictable workloads. Yet many barriers remain until we can fully realize the opportunities and benefits from the convergence of machines and devices with Big Data and the cloud, including interoperability, ...
Discussions about cloud computing are evolving into discussions about enterprise IT in general. As enterprises increasingly migrate toward their own unique clouds, new issues such as the use of containers and microservices emerge to keep things interesting. In this Power Panel at 16th Cloud Expo, moderated by Conference Chair Roger Strukhoff, panelists will address the state of cloud computing today, and what enterprise IT professionals need to know about how the latest topics and trends affec...
While there are hundreds of public and private cloud hosting providers to choose from, not all clouds are created equal. If you’re seeking to host enterprise-level mission-critical applications, where Cloud Security is a primary concern, WHOA.com is setting new standards for cloud hosting, and has established itself as a major contender in the marketplace. We are constantly seeking ways to innovate and leverage state-of-the-art technologies. In his session at 16th Cloud Expo, Mike Rivera, Seni...
The Internet of Things is tied together with a thin strand that is known as time. Coincidentally, at the core of nearly all data analytics is a timestamp. When working with time series data there are a few core principles that everyone should consider, especially across datasets where time is the common boundary. In his session at Internet of @ThingsExpo, Jim Scott, Director of Enterprise Strategy & Architecture at MapR Technologies, discussed single-value, geo-spatial, and log time series dat...
All major researchers estimate there will be tens of billions devices - computers, smartphones, tablets, and sensors - connected to the Internet by 2020. This number will continue to grow at a rapid pace for the next several decades. With major technology companies and startups seriously embracing IoT strategies, now is the perfect time to attend @ThingsExpo, June 9-11, 2015, at the Javits Center in New York City. Learn what is going on, contribute to the discussions, and ensure that your enter...
SYS-CON Events announced today that MetraTech, now part of Ericsson, has been named “Silver Sponsor” of SYS-CON's 16th International Cloud Expo®, which will take place on June 9–11, 2015, at the Javits Center in New York, NY. Ericsson is the driving force behind the Networked Society- a world leader in communications infrastructure, software and services. Some 40% of the world’s mobile traffic runs through networks Ericsson has supplied, serving more than 2.5 billion subscribers.
SYS-CON Events announced today that O'Reilly Media has been named “Media Sponsor” of SYS-CON's 16th International Cloud Expo®, which will take place on June 9–11, 2015, at the Javits Center in New York City, NY. O'Reilly Media spreads the knowledge of innovators through its books, online services, magazines, and conferences. Since 1978, O'Reilly Media has been a chronicler and catalyst of cutting-edge development, homing in on the technology trends that really matter and spurring their adoption...
Amazon, Google and Facebook are household names in part because of their mastery of Big Data. But what about organizations without billions of dollars to spend on Big Data tools - how can they extract value from their data? In his session at 6th Big Data Expo®, Ali Ghodsi, Co-Founder and Head of Engineering at Databricks, discussed how the zero management cost and scalability of the cloud is addressing the challenges and pain points that data engineers face when working with Big Data. He also s...
The 4th International Internet of @ThingsExpo, co-located with the 17th International Cloud Expo - to be held November 3-5, 2015, at the Santa Clara Convention Center in Santa Clara, CA - announces that its Call for Papers is open. The Internet of Things (IoT) is the biggest idea since the creation of the Worldwide Web more than 20 years ago.
The Internet of Things is a misnomer. That implies that everything is on the Internet, and that simply should not be - especially for things that are blurring the line between medical devices that stimulate like a pacemaker and quantified self-sensors like a pedometer or pulse tracker. The mesh of things that we manage must be segmented into zones of trust for sensing data, transmitting data, receiving command and control administrative changes, and peer-to-peer mesh messaging. In his session a...
SYS-CON Events announced today that EnterpriseDB (EDB), the leading worldwide provider of enterprise-class Postgres products and database compatibility solutions, will exhibit at SYS-CON's 16th International Cloud Expo®, which will take place on June 9-11, 2015, at the Javits Center in New York City, NY. EDB is the largest provider of Postgres software and services that provides enterprise-class performance and scalability and the open source freedom to divert budget from more costly traditiona...
An entirely new security model is needed for the Internet of Things, or is it? Can we save some old and tested controls for this new and different environment? In his session at @ThingsExpo, New York's at the Javits Center, Davi Ottenheimer, EMC Senior Director of Trust, reviewed hands-on lessons with IoT devices and reveal a new risk balance you might not expect. Davi Ottenheimer, EMC Senior Director of Trust, has more than nineteen years' experience managing global security operations and asse...
The multi-trillion economic opportunity around the "Internet of Things" (IoT) is emerging as the hottest topic for investors in 2015. As we connect the physical world with information technology, data from actions, processes and the environment can increase sales, improve efficiencies, automate daily activities and minimize risk. In his session at @ThingsExpo, Ed Maguire, Senior Analyst at CLSA Americas, will describe what is new and different about IoT, explore financial, technological and re...
The OpenStack cloud operating system includes Trove, a database abstraction layer. Rather than applications connecting directly to a specific type of database, they connect to Trove, which in turn connects to one or more specific databases. One target database is Postgres Plus Cloud Database, which includes its own RESTful API. Trove was originally developed around MySQL, whose interfaces are significantly less complicated than those of the Postgres cloud database. In his session at 16th Cloud...
The web app is Agile. The REST API is Agile. The testing and planning are Agile. But alas, Data infrastructures certainly are not. Once an application matures, changing the shape or indexing scheme of data often forces at best a top down planning exercise and at worst includes schema changes which force downtime. The time has come for a new approach that fundamentally advances the agility of distributed data infrastructures. Come learn about a new solution to the problems faced by software orga...
There will be 150 billion connected devices by 2020. New digital businesses have already disrupted value chains across every industry. APIs are at the center of the digital business. You need to understand what assets you have that can be exposed digitally, what their digital value chain is, and how to create an effective business model around that value chain to compete in this economy. No enterprise can be complacent and not engage in the digital economy. Learn how to be the disruptor and not ...
In their general session at 16th Cloud Expo, Michael Piccininni, Global Account Manager – Cloud SP at EMC Corporation, and Mike Dietze, Regional Director at Windstream Hosted Solutions, will review next generation cloud services, including the Windstream-EMC Tier Storage solutions, and discuss how to increase efficiencies, improve service delivery and enhance corporate cloud solution development. Speaker Bios Michael Piccininni is Global Account Manager – Cloud SP at EMC Corporation. He has b...
The enterprise market will drive IoT device adoption over the next five years. In his session at @ThingsExpo, John Greenough, an analyst at BI Intelligence, division of Business Insider, will analyze how companies will adopt IoT products and the associated cost of adopting those products. John Greenough is the lead analyst covering the Internet of Things for BI Intelligence- Business Insider’s paid research service. Numerous IoT companies have cited his analysis of the IoT. Prior to joining B...