Dell silent on rumoured plans to leave stock exchange
Published 16/01/2013 | 05:00
DELL has refused to comment on reports that the company may be taken private as it prepares to undergo a huge restructuring.
Reports from the US indicated the computing giant's founder Michael Dell was in talks with a number of banks and private equity firms about the possibility of running a leveraged buyout and taking the company off the stock market.
While Dell employs more than 2,500 people in Ireland, there is no suggestion that jobs here would be at risk if a deal goes through.
If the planned LBO does happen, it would take several months to complete.
Dell is struggling in what is now a declining market for laptop computers and desktops. The company's share price has been in the doldrums for some time, dropping from more than $18 (€14) in February to less $9 in November. After a late surge on Monday evening, the stock was trading at $12.46 by mid-afternoon in New York.
Changing into a private company would free Dell from having to post quarterly accounts and also remove it from the glare of institutional investors.
The company is transforming itself from being a pure manufacturing operation to a software and services firm.
Rival Hewlett-Packard announced it would sell its PC business last year, but later cancelled the plan.
Analysts were broadly positive on whether an LBO would be the right move for the company.
"They could generate a tremendous amount of cash for many years to come, or they could be more dramatic and invest heavily in a mobile strategy and not be scrutinised by public investors every quarter while they did it," said Rich Kugele, an analyst at Needham & Co.
Abhey Lamba of Mizhuo agreed.
"He [Dell] wants to de-emphasise about two-thirds of his business, and that's a hard strategy to push.
"That's a hard one to play when you're in the public market."
With a book value of $19bn, if an LBO goes through it will likely involve several private equity houses. The days of a single PE firm such as Kohlberg Kravis Roberts doing a deal of this size are gone for now.
The track record of LBOs in the technology sector is patchy at best. Disk-drive maker Seagate Technology's attempt to go private failed, while Fidelity National Information Services' buyout talks fizzled in 2010 after the company sought a higher price than private-equity firms offered. (Additional reporting by Bloomberg)