This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Dell Earnings Are on Deck, but the Focus Is on the Buyout Price

Stocks in this article: DELL AAPL

NEW YORK ( TheStreet) -- Dell (DELL) reports fourth-quarter results after the market close, with investors eager for hints about the company's buyout price tag.

Earlier this month, Dell said founder and CEO Michael Dell and private equity firm Silver Lake Partners are acquiring the company in a $24.4 billion deal. Under the terms of the transaction, Dell shareholders will receive $13.65 a share in cash, a premium of 25% to the company's closing price Jan. 11 when rumors of the deal emerged.

The CEO wants greater flexibility to shift the No. 3 PC maker's focus toward lucrative software and services offerings. This, he believes, can be better achieved away from the glare of the public markets.

The buyout, however, has proved controversial, prompting opposition from a number of investors, including the company's second-largest shareholder, Southeastern Asset Management, which says Dell's worth around $24 a share. Some 86% of respondents to TheStreet's poll on the subject agree that shareholders are getting a raw deal, describing the premium as a "joke."

Speculation's now mounting that Michael Dell could face tricky questions about the buyout during today's earnings conference call. "Although CEO Michael Dell could be somewhat limited in what he can say with respect to his offer to take the company private, investors will look for clues on his willingness to see the deal through either at the current price or slightly higher," wrote Brian Marshall, an analyst at ISI Group, in a note released on Tuesday.

"Given the growing discontent around the $13.65 privatization price tag, it will be interesting to see how the company handles the call," said Brian White, an analyst at Topeka Capital Markets, in a note. "Tonight's call is meant to be focused on Dell's quarterly results; however, we expect there will be questions around the privatization plan and it is not clear how Dell will handle deal-related inquiries."

White believes that, while Dell could sidestep any deal-related questions, a higher price for the company is still needed, as evidenced by recent investor unrest. A $16 target would be a reasonable price for all parties involved, according to the analyst, who warns that a higher price tag could kill the deal.

Weighed down by weakness in the PC market and stiff competition from the likes of Apple (AAPL) and Lenovo, Wall Street has modest fourth-quarter expectations for Dell. Analysts surveyed by Thomson Reuters expect Dell to earn 39 cents a share on revenue of $14.12 billion, down from $16 billion and 51 cents a year earlier.

For the coming quarter, Wall Street expects earnings of 38 cents a share and revenue of $13.59 billion.

The company's fourth-quarter numbers and first-quarter guidance, however, could have a big impact on the ultimate buyout deal, according to ISI Group's Marshall. "If current results and the outlook come in above expectations, odds that the deal is completed around the current price will diminish," he wrote.

Nonetheless, the analyst notes that Dell is in a tough business environment. "Given the secular headwinds in PCs facing DELL as it undertakes a multi-year transformation, we expect a deal will ultimately be completed around the current share price to slightly higher, particularly if near-term results come in below expectations."

Shares of Dell, which have tumbled 24% during the past 12 months, were little changed at $13.82 on Tuesday.

-- Written by James Rogers in New York

>To submit a news tip, send an email to: tips@thestreet.com.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs