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Dell in talks with buy-out firms to go private: report news
15 January 2013

Michael DellDell Inc, the world's third-largest personal-computer maker, is in talks with buy-out firms for a leveraged buy-out of its shares from the market, after the company's stock dropped 30 per cent during the past one year.

Reports quoting market sources said Dell has discussed a potential sale with at least two buy-out firms that specialise in acquiring dud stock.

Dell did not, however, deny or confirm the report.

Reports quoting a source close to the persons, meanwhile, said Dell is discussing a leveraged buyout with private equity firms TPG Capital and Silver Lake.

While a share buy-back would be expensive for the promoters, Dell expects it to give the company the necessary freedom to plan a jump-start once again.

Shares of the Round Rock, Texas-based Dell soared 13 per cent on Monday following report of the buy-back plan. Dell stock closed at $12.28 on Monday, after it touched $12.83 - its highest level since May.

The struggling personal computer maker has been finding it hard to bring about an overhaul of the company ever since founder Michael Dell decided to take it public through an IPO 25 years ago.

A share buy-back to take the company private would also require the backing of CEO and founder Michael Dell, who is also the company's largest shareholder with a 15.7 per cent stake.

Analysts, however, expect Michael Dell and other directors on the company's board to be willing to sell at $15 or $16 per share, helping to raise up to $28 billion for the share buy-back.

The increasing preference for smart phones and tablet PCs has hurt sales of almost all personal computer makers with falling demand for laptops and desktops.

Dell has been trying to adapt to the new environment by expanding into business software and technology consulting services.

Dell could increase profits despite lower operating margins through direct sales by cutting out middlemen and honing manufacturing to consumers' tastes by giving the exact PC configuration they wanted. But this too does not seem to hold now.

Michael Dell is reported to have spent more than $12.7 billion in the past four years to compensate for plunging PC demand.

A leveraged buy-out would free Dell from the compulsions of the stock market that has lost patience with the company's shrinking PC sales.

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Dell in talks with buy-out firms to go private: report