Dell’s shares rise by 13% due to talks going with firms for a potential buyout
On Tuesday Dell’s shares rose by 13% due to the news of company may go private. According to a report published by Bloomberg, Dell is talking with at least two large equity firms for a potential buyout. A buyout may not solve all problems of the company. However, it may enable the company to take appropriate steps for recovering itself without worrying about shareholders.
It is notable that Dell has rapidly lost it’s market share to HP and Lenovo in last few years. Although home-based computers and other computer server machines provide around 50% of revenue to the company, but still the company has been focusing more on the business of equipping large data centers for corporates. This is primarily because that PC business is shrinking slowly.
In 2012, company sold around 37.6 million PCs globally. This is a 12% decrease if we compare to the data of 2011. The primary reason behind this is arrival of tablets and smartphones, who can complete almost all tasks of PCs and also do not require much room for residing. So you can say that that if this business keeps slipping from company’s hands from a rate of 12% every year, then company can lose around 60%-72% part of it’s business in next 5 years. Even if company applies some techniques for holding the market share in it’s hands, still 50% market may slip from company’s hands as more amazing smartphones and tablets are continuously coming to the market. And Dell’s head of corporate software business, John A. Swainson, said in an interview, it will take around 5 years for company to build it’s business big enough for data centers of big corporates. So the company is focusing more on creating a large new market for it instead of trying to preserve an already slipping market. It obviously makes sense.
Any deal that goes on will include Miachel Dell, Founder and CEO of Dell who holds around 16% shares of the company. The buyout may result out in a deal of $20 billion dollar (excluding company’s $9 billion of debt). This may become the biggest acquisition after recession period. Even after a 30% decline in company’s stock prices noticed till Monday, this company may become a huge beast for both equity firms together when it comes to acquisition. Previously when CEO of the company Mr. Dell was asked in an interview that whether he is planning to make the company private or not, “Yes” was the only thing that he said.