The news circulated through the trading desks based on a Reuters headline Thursday, but some analysts were skeptical that company founder Dell could find the sort of financing needed to buy out shareholders.
|Michael Dell, Chairman and Founder of Dell|
One analyst offered a back-of-the-envelope estimate that assumed a $20 per share buyout price. With that bid, the total price tag would be between $35 billion and $40 billion, a hefty amount considering that Dell is not exactly a cash-generating machine that typically appeals to private equity shops.
Dell has had a difficult three years as its once enviable low-cost direct-sale model failed to stand up to even lower cost competitors and a strong retail notebook strategy by Hewlett-Packard (HPQ - Get Report).Dell rejoined the company to revive the business and had only mixed results with a bigger retail push amid a withering technology spending slowdown. It's not clear if Dell made the going-private statement on reflection of the more turbulent times two years ago, or whether it was an assessment of the business today. The rumors of Michael Dell taking his company private come at a crucial time for the computer maker, which is desperate to break into new markets. Dell, which went public in 1988, struggled with weak PC sales during the recession, and is playing catch up to Apple (AAPL) in smartphones. The company's services business is also up against stiff competition from IBM (IBM - Get Report) and H-P. Lingering economic uncertainty is another factor weighing heavily on Dell. Dell's profit jumped during its recent third-quarter results, but gross margins narrowed enough for investors to sell off the company's stock. Dell shares closed up 64 cents, or 5%, at $13.76 Thursday. --Written by Scott Moritz and James Rogers in New York.