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.
Francis Ford Coppola’s new film “Megalopolis” cost $120m and he self-financed it (including money from selling his winery).
Coppola is a legend of “going all in” and “putting skin in the game”.
The GOAT example is “Apocalypse Now”, his classic 1979 war film with arguably the most insane production story ever.
Let’s rewind to 1975, the year Copolla turned 36: he is on top of Hollywood after directing “The Godfather” (1972) and “The Godfather II” (1974).
What does Coppola choose to do next? Make a film about the Vietnam War. The script was based on Joseph Conrad’s “Heart of Darkness”, the 1889 novel about the horrors of colonialism in the Belgian Congo.
The major studios all said “no” to Coppola’s pitch for three major reasons:
1️⃣ He wanted full creative control
2️⃣ He wanted to own all of the film rights
3️⃣ The Fall of Saigon happened in April 1975 and the American audience wasn’t exactly asking for a Vietnam War film (the studios wanted Coppola to make another Mafia flick)
Coppola was undeterred and made a huge bet.
“The Godfather II” cost $14m and the director estimated that “Apocalypse Now” would be the same budget.
He put up $7m (mostly from those sweet Godfather checks) and raised another $7m from United Artists (which bought domestic distribution rights for ~7 years).
But the project was a disaster from the start.
Filming started in The Philippines in March 1976 and was supposed to last 3-4 months…it would take 16 months:
▫️Harvey Keitel was the initial lead but Coppola fired him after one week.
▫️Martin Sheen (Captain Willard) took the lead role but drank so much on set that he gave himself a stress-induced heart attack and almost died.
▫️Dennis Hopper was doing 3g of coke and 20+ drinks a day while on set (him and Marlon Brandon also hated each other).
▫️A typhoon destroyed 80% of the set and delayed filming for 2-3 months.
▫️Actual dead bodies — stolen from a local grave — were used on set and the Filipino government and its strongman leader Ferdinand Marcos threatened to shut down production after finding out.
▫️Marlon Brando (Col. Kurtz) demanded a huge fee ($3m+ for 3 weeks of work and 10% of the film’s gross). He then showed up late, asked for rewrites, declined to read Conrad’s book and was so overweight that the costumes wouldn’t fit (to obscure his heft, Copolla filmed Brando in the shadows and had him wear oversized dark clothing).
The budget ballooned to over $30m.
To maintain creative control and maintain all the film rights, Coppola mortgaged his home and borrowed money against his ownership in The Godfather.
After the success of “Star Wars” (1977), Coppola even asked his friend and business partner George Lucas — who was originally tapped to direct Apocalypse — for some funds.
I repeat: Coppola went ALL THE WAY IN and had SKIN IN THE GAME.
His wife Eleanor took recorded video of all the insanity and the footage was turned into a 1991 documentary (“Hearts of Darkness: A Filmmaker's Apocalypse”).
The total cost for the film — including marketing spend — reached $45m.
Against all odds, Coppola finished the project and the film was released in August 1979. It grossed $105m and Coppola would make a fortune on future DVD, Home Video and other ancillary revenue streams (below is a trailer for a re-mastered cut from 2019).
During the Cannes Festival in May 1979, Coppola famously said of the film: “The way we made it was very much like the way the Americans were in Vietnam. We were in the jungle, there were too many of us, we had access to too much money, too much equipment, and little by little, we went insane.”
Coppola also said at Cannes that “My movie is not *about* Vietnam. My movie *is* Vietnam”.
It’s def one of the best films ever but that is … a stretch of a comparison.
If you want more on Apocalypse Now, I went on Jim O'Shaughnessy’s “Infinite Loops” podcast with Rob Henderson to talk about the making and psychology of the film. open.spotify.com/episode/38OYIn…
When Iron Man came out in 2008, Robert Downey Jr. was *not* a marquee star.
He was rebuilding his career and paid a below market rate of $500k.
But the deal terms set him up for one of the great acting comebacks ever (while earnings $450m+ as Tony Stark).
Here’s the story 🧵
The Marvel Cinematic Universe (MCU) we know today was a long shot in the early 2000s.
Marvel was a public co. coming off bankruptcy in 1996 and had sold rights to its best IP (Spiderman, X-Men, Fantastic 4)
From 2000-07, films based on the IP minted cash but Marvel made little:
In the early-90s, Downey Jr. was one of the brightest young stars in Hollywood, receiving a Best Actor nomination for "Charlie Chaplin" in 1992 (@ 27yrs old).
In the 2nd half of the decade, though, he dealt with drug addiction, arrests and jail stints before going clean in 2003.
Masayoshi Son does the craziest investment swings:
▫️In mid-90s: invested $1.7B into 100+ internet firms (including a ~30% stake in Yahoo! for $100m)
▫️In 2000: was worth $78B at peak Dotcom and was the richest person in the world for 3 days (ahead of Gates)
▫️The bubble burst and he lost 99% of wealth
▫️In 2000, puts $20m into Alibaba for a 34% stake (sold out almost entirely by 2023 and made ~$72B)
▫️Lost $14B on WeWork
▫️Once owned ~5% of Nvidia but sold it all for $3.6B in 2019 (that stake would now be worth $90B)
▫️In 2016, Softbank bought Arm Holdings for $32B (still owns 90% and the stake is $114B, a gain of $82B)
Based on his ownership in Softbank and other investment vehicles, his personal wealth is currently ~$15B.
Nearly 100% of intercontinental internet traffic goes through submarine cables.
It is a robust system with many redundancies.
There are 500+ subsea cables and a fleet of 60 repair shops on stand-by but Big Tech isn’t taking chances:
▫️GOOGLE invested in 25 cables (and owns 12 outright). Per The Economist, the search giant started its sea cable program in 2008.
◽META invested in 15 cables (owns 1 outright).
◽MICROSOFT partly owns 4 cable.
One of the 500+ cable gets cut every 3 days (most common reasons are shark bites, anchor drops and deep-sea fish trawlers).
Remote areas are still very at risk.
Example: In 2022, a volcano erupted near Tonga and a mudslide took out the only cable nearby. Starlink provided some free internet coverage while it took 5 weeks for the cable to be fixed (5 weeks!!).
Robert Metcalfe (inventor, ethernet cable) famously predicted internet would flame out. He thought cables couldn’t handle traffic and not enough investment in them.