In 2013, Dell Inc was a struggling PC and hardware firm. CEO Michael Dell took it private in a $25B buyout and turned it into an IT infrastructure + cloud giant (re-listing as Dell Technologies in 2018)
The $4B that Dell put up in the deal is now worth $40B.
Here's the story🧵
We start in 1984, when @MichaelDell was a freshman pre-med student at University of Texas.
He was not a typical student: The 19yo launched a company called PC's Limited with $1k, selling computers (assembled from stock parts) from his dorm room. It was soon making $80k a month.
Apple's Macintosh was released in 1984. While Steve Jobs offered a pricy integrated PC, Dell provided a lower-priced options by:
◻️Going direct-to-consumer (order over phone)
◻️Offering made-to-order options which kept inventories low
Dell would drop out of school after 1 year.
In 1988, the company re-branded as Dell Computers and IPO'd at a market cap of $85m (for reference, Microsoft went public in 1986 @ $780m).
Dell was 23.
Dell Computers joined the Fortune 500 in 1992 and Dell -- at age 26 -- was the youngest CEO on the list (net worth = $300m+).
Boosted by online sales (which began in 1996), Dell Computers overtook Compaq to become the world's top PC seller in 2001.
Dell retired in 2004 but returned in 2007. In the following years, a host of devices (smartphone, laptops, Chromebook, tablets) took share from PCs.
From 2007 to 2012, Dell Inc. spent $14B on acquisitions to jumpstart its business amidst a saturated PC market (PC sales peaked in 2011).
Nothing worked: Dell Inc. stock lagged the NASDAQ for years.
Change was needed. And a plan came out of Michael Dell's family office (MSD).
MSD Capital takes its name from Dell's initials. The family office was formed in 1998 and managed his multi-billion dollar fortune including investments with PE firm Silver Lake.
In 2012, Silver Lake's Egon Durban pitched the idea of taking Dell private (to pivot the business).
In February 2013, Dell tried taking the company private at $24.4B (a 40% premium).
Investor Carl Icahn felt the offer was too low (pre-offer, Dell shares were trading 1/3rd of 5-yr highs) and fought the deal.
Dell finally won out in October 2013 w/ a $25B deal (he put up $4B):
Dell and Durban weren't done.
For years, Dell tried to acquire EMC, a giant data storage firm that owned an 81% stake in VMWare (a leader in cloud-computing and virtualization).
EMC was "in-play" for offers after Hewlett-Packard tried to acquire it. It was pricey, though: $65B.
Already coming off a huge leveraged-buyout, Dell had to find a way to finance the acquisition.
The solution: a tracking stock, which is a type of equity that "tracks" a division of a larger company.
To close the deal for EMC, Dell issued a tracking stock worth 53% of VMWare.
In a complicated transaction, Dell bought EMC (and its juicy VMWare stake) for $67B, the largest tech acquisition ever at the time.
The VMWare tracking stock saved Dell a $12B cash outlay. And Dell raised $50B in debt w/ VMWare as collateral. The deal closed in September 2016.
VMWare is a cash-printing machine. And after the deal, this was its ownership structure:
◻️53% in tracking stock (incl. Carl Icahn)
◻️28% for Dell/Silver Lake
◻️19% (stake not owned by EMC that was listed on NYSE)
In 2018, Dell made a move to buy out the VMWare tracking stock.
At first, Dell offered $9B from VMWare's balance sheet to buyout shareholders of the tracking stock at $0.60 on the dollar.
Icahn (again) fought back and the offer moved to $14B. To close the deal, Dell decided to bring the company public as Dell Technologies in December 2018.
At first, the re-listed Dell sold off. With a $50B+ debt pile, the market valued Dell <$0 based on its VMWare stake.
Dell said it would spin off the entire 81% VMWare stake and the market cheered it on. The deal closed last Fall.
The private turnaround has made Dell a fortune.
Before going private in 2013, Dell owned 16% of a PC maker. Now he owns:
◻️52% of Dell Technologies (a $100B revenue IT infrastructure business); stake = $19B
◻️43% of VMWare (a $12B revenue cloud business); stake = $21B
In 9yrs, Dell's investment has grown from $4B to $40B.
A key difference w/ Dell buying Dell Inc and Elon buying Twitter is debt: Dell Inc had the cash flow to support more of it.
Michael Dell personally put up 16% ($4B) of the $25B Dell deal. Elon may put up as much as 64% ($33.5B) of the $46.5B Twitter deal (huge skin in the game).
If you enjoyed that, I write business threads 1-2x a week.
Def follow @TrungTPhan to catch them in your feed.
The amount of work Hayao Miyazaki and Studio Ghibli team put into a film is mind-boggling.
Each typically has 60k-70k frames, all hand-drawn and painted with water color.
This 4-second clip (“The Wind Rises”) took one animator 15 months to do. Insane.
The docu “10 Years with Hayao Miyazaki” shows him talking to the animator (Eiji Yamamori) after its done.
It’s so good:
Miyazaki: “Good job.”
Yamamori: “It’s so short, though”
Miyazaki: “But it was worth it.”
The animator gets a second of joy (he’s pumped) but on to the next.
Miyazaki doesn’t use digital FX or computer graphics. He believes “that the tool of an animator is the pencil.”
On a related note, here’s something I wrote about another Japanese legend dedicated to the craft (Ichiro Suzuki) and the art of mastery: readtrung.com/p/jerry-seinfe…
New York City paid Mckinsey $4m to conduct a feasibility study on whether trash bins are better than leaving garbage on the street.
The deck is 95-slides long and titled “The Future of Trash”.
Some highlights:
▫️The official term is “containerization”, which is the “storage of waste in sealed, rodent-proof receptacles rather than in plastic bags placed directly on the curb.”
▫️Two main types of containerization: 1) individual bins for low density locales; 2) shared containers for high-density.
▫️NYC needs to clean up 24,000,000lbs of garbage a day
▫️Containerization has only become the norm worldwide in major cities in the past 15 years.
▫️New York City first considered containerization in the 1970s but never conducted a feasibility study until now (Mckinsey’s sales team has been dropping the ball)
▫️Key considerations for container viability:
• POPULATION DENSITY: NYC has 30k residents per square mile (more dense than comparable big cities)
• BUILT ENVIRONMENT: Few places to “hide” containers due to history of infrastructure development.
• WEATHER: Snow creates challenges for “mechanized collection” in the winter.
• CURB SPACE: Mostly taken up by bus stops, bike lanes, outdoor dining and fire hydrants.
• COLLECTION FREQUENCY: NYC needs to double frequency of pick-up for estimated speed of trash that bins would accumulate.
• FLEET: A new garbage truck will needs to be designed to collect rolling bins at scale.
▫️ The proposed solution (literally garbage bins and shared containers) covers 89% of NYC streets and 77% of residential tonnage.
▫️The three case studies — because you gotta have solid case studies — are Amsterdam, Paris and Barcelona.
▫️There is a slide called “Why containerization matters” and three reasons are “rats”, “pedestrian obstruction” and “dirty streets” (the 21-year intern that did this slide billed at prob $10k an hour is my hero).
The study is actually pretty interesting.
I have no idea if $4m is a rip-off to learn that “yeah, we should put garbage in bins so rats don’t eat it” but I would have happily done it for 10-20% of that budget (and come to a similar conclusion).
It is actually an interesting deck. Just the thought of a 20-year old newly grad getting billed at an obscene rate to say”rats get to garbage” is kinda funny
Four more solid slides:
— By the numbers (daily garbage = 140 Statue of Liberty a day!!)
— City comparison
— Container comparison (looks like they did select the “scalable” trash bin)
— Curb side analysis
Think Mckinsey telling NY to “put garbage in bins so rats don’t eat it and people can walk” will work out better than when it told AT&T in 1981 that cellphones would be “niche.”
The Economist latest cover story on solar energy is packed with interesting stats.
▫️Solar energy will be the primary source of human energy use by 2040
▫️$500B spent on buying and installing solar panels in 2024 (nearly same “sum being put into upstream oil and gas”)
▫️Solar on track to produce “more electricity than all the world’s nuclear power plants in 2026, than its wind turbines in 2027, than its dams in 2028, its gas-fired power plants in 2030 and its coal-fired ones in 2032”
▫️Since the 1960s…the levelised cost of solar energy—the break-even price a project needs to get paid in order to recoup its financing for a fixed rate of return—has dropped by a factor of more than 1,000
▫️From the mid-1970s to the early 2020s cumulative shipments of photovoltaics increased by a factor of a million, which is 20 doublings.
▫️Over the same span, the “prices dropped by a factor of 500. That is a 27% decrease in costs for each doubling of installed capacity, which means a halving of costs every time installed capacity increases by 360%.”
▫️The cost of a kilowatt-hour of battery storage has fallen by 99% over the past 30 years.
The chart below — which they made vertical (kind of weird) — shows global useful energy consumption over the past century.
I’ll add two more posts after this one with excerpts on obstacles and opportunities.
— A lot of A/C for Sub-Saharan African (need 2TW of new solar just for Africa to reach India level of electricity use)
— Filter air continuously (reduce spread of airborne diseases)
— Carbon removal
— Water desalination
— AI/Data energy needs
Details from Red Lobster’s bankruptcy filing are wild and so much mismanagement:
▫️$1B in debt, $30m in cash
▫️Previous PE owner sold land and leased it back to Red Lobster at “above market rates”
▫️$20 Endless Shrimp cost it $11m but the interesting part is that one of the chain’s owners is Thai seafood firm Thai Union (which also owns Chicken By The Sea) and it may have used Endless shrimp to dump its own shrimp supply through the 578 restaurants in North America
▫️Thai Union became the only Red Lobster shrimp vendor, overcharging for shrimp and skipping quality reviews (Thai Union has written off its $500m+ investment)
▫️Red Lobster has had 5 CEO in the last 5 years (!!!)
▫️Sales down 30% since 2019
Red Lobster needed Yukitaka Yamaguchi — aka Japan’s Tuna King (sleeps 3 hours a day and knows where any fish is from on a single bite) — to run quality control.
Also, never forget Beyoncé name dropped Red Lobster with some R-rated verses in 2016 (“Formation”) and Red Lobster social responded and there was actually a brief sales surge.