Dell Shares Soar On Going Private Suggestion

on December 03 2012 12:07 PM
Dell
Dell Inc., headed by Michael Dell, remained mum on reports it was close to completing a leveraged buyout with Silver Lake Partners. Reuters

 

Shares of Dell Inc. (NASDAQ:DELL), the No. 3 PC maker, soared nearly 9 percent Monday after an analyst suggested the company might tap its cash pile for a leveraged buyout. They rose another 2.5 percent on Tuesday.

At the Monday close, shares of Dell were at $10.06, up 42 cents, after touching $10.49 earlier, after Bill Shope, an analyst for Goldman Sachs (NYSE:GS), suggested the buyout option. On Tuesday, they rose another quarter to $10.31.

Dell, of Round Rock, Tex., had no comment.

The rationale for Shope is that with its $5.2 billion in cash and investments reported when Dell closed its third quarter, CEO Michael Dell, who still owns 14 percent of the shares outright, might go private. Private equity companies would join with Dell to buy all its shares, then load the now-private company with new debt that would be paid off over time.

That would end shareholder pressure to improve value, as the company keeps shifting more to high-end services and software, rather than being a mere supplier of PCs and laptops, Shope said.

Even with the two-day jump, Dell shares have fallen more than 34 percent in the past 52 weeks and 26 percent in 2012, which could be the first year when shipments of PCs and laptops decline on an annual basis, researchers including IDC and Gartner Group (NYSE:IT), have suggested.

Other analysts discounted the Dell idea. At Barclays Capital, analyst Ben Reitzes kept a “neutral” rating on the shares and noted that the company's maintenance services business has reported solid increases for all of 2012.

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