DailyTech - Report: Dell May be Going Private

Submit News

Gadgets Report: Dell May be Going Private
Tiffany Kaiser - January 14, 2013 8:34 PM

26 comment(s) - last by TakinYourPoint.. on Jan 16 at 3:14 AM

(Source: ens-newswire.com)

Dell is in buyout talks with two private-equity firms

In an attempt to one day resurface as a true competitor in the computer technology industry, Dell is looking to go private.

An anonymous source recently told Bloomberg that Dell is in buyout talks with two private-equity firms. The talks are in their earliest stages, so it's unclear if the buyout will go through.

Dell is likely looking to go private because it lost one-third of its value last year alone. PC sales are slow since PC demand can't keep up with that of mobile devices, and Dell has to hear about its financial failures from shareholders each quarter.

Dell's market value was $18.9 billion as of January 11. Its enterprise value is 4.4 times earnings before taxes, depreciation, amortization and interest for the last year, making it a lower valuation than every PC maker bigger than $1 billion with the exception of Hewlett-Packard.

Like some other PC makers, Dell was hoping that Windows 8's release would help boost sales of its hardware. However, Windows 8 device sales haven't been that impressive. While Microsoft happily announced 60 million Windows 8 licenses sold just last week, that doesn't mean Windows 8 devices are flying off the shelves. Dell is still waiting on a sales boost for devices like the Dell XPS 12 convertible tablet.

For the third quarter in 2012, Dell's profit fell 47 percent to 39 cents per share while revenue dropped 11 percent to $13.7 billion from a year previous (Wall Street expected $13.9 billion). Its net income fell from $893 million (49 cents per share) in Q3 2011 to $475 million (27 cents per share) in Q3 2012.

For the same quarter, Dell's PC shipments fell 8.3 percent from a year earlier.

Dell predicts fourth quarter revenue of $14 billion to $14.4 billion, which is a bit less than the $14.5 billion analysts were shooting for. In Q4 2011, revenue was $16 billion.

One good aspect is that Dell's shares increased 13 percent today after news of the possible buyout had spread.

Source: Bloomberg