Private equity talk sees Dell soar

SHARES in Dell have soared 13 per cent to a near eight-month high on reports the world's third-largest personal computer maker is in talks with at least two private equity firms about going private.

By InvestSMART · 16 Jan 2013

By InvestSMART ·
16 Jan 2013

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SHARES in Dell have soared 13 per cent to a near eight-month high on reports the world's third-largest personal computer maker is in talks with at least two private equity firms about going private.

The discussions between the PC maker, which has ceded market share to rival Hewlett Packard and China's Lenovo, and private equity are preliminary and financing has not been secured.

Dell is grappling with dwindling demand for traditional desktop and laptop computers with the advent of tablets like Apple's iPad.

The company, now reinventing itself as a provider of computers and services to corporations and government agencies, saw shipments of computers fall 21 per cent in the fourth quarter. Profits fell 47 per cent in the third quarter.

The company's market value stood at about $US19 billion ($18 billion) before Monday's rally.

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Frequently Asked Questions about this Article…

Why did Dell shares soar about 13% and reach an eight-month high?

Dell shares jumped about 13% on reports the company is in talks with at least two private equity firms about potentially going private. The discussions were described as preliminary and financing had not been secured, but the news drove the rally.

Is Dell actually going private with private equity firms?

The article reports Dell is in talks with at least two private equity firms, but those discussions are preliminary and financing has not been secured, so a going-private deal is not guaranteed.

How big is Dell’s market value reported before the share rally?

Before the Monday rally, Dell’s market value was reported at about US$19 billion (around $18 billion).

What recent sales and profit challenges has Dell faced?

Dell saw shipments of computers fall 21% in the fourth quarter and reported a 47% drop in profits in the third quarter, according to the article.

How are tablets like Apple’s iPad affecting Dell’s PC business?

The article says the advent of tablets such as Apple’s iPad has contributed to dwindling demand for traditional desktop and laptop computers, which has hurt Dell’s PC sales.

How is Dell changing its business strategy amid falling PC demand?

Dell is reinventing itself as a provider of computers and services to corporations and government agencies, shifting focus away from consumer-only PC sales.

Who are Dell’s main competitors mentioned in the article?

The article names Hewlett-Packard and China’s Lenovo as rivals that have taken market share from Dell.

What does it mean that financing for a buyout has “not been secured”?

It means that while private equity talks are reported, the necessary funding and formal agreements to complete a buyout haven’t been finalized, so any deal remains uncertain.