Can This Problem Hold Dell’s Deal Back?
With its share of the personal computer market hovering behind Hewlett-Packard (NYSE:HPQ) and Lenovo (LNVGY.PK), and its stock price losing almost a third of its value last year, a leveraged buyout does not seem out of the realm of possibility for Dell (NASDAQ:DELL). But while a report published in Bloomberg, indicating that the company had been discussing plans to go private, caused shares to shoot up by as much as 18 percent on Monday, not everyone was convinced of the agreement’s plausibility.
Private equity investor Wilbur Ross told CNBC on Tuesday that there was only a “50-50” chance that the computer manufacturer will be taken private in the rumored $20-million-plus deal. The reasons for the partnership potentially not going through were not Dell’s mismanagement or its bad balance sheet necessarily, but the fact that the company was so far behind in the latest technological trend: the tablet.
Those problems have made it an unappealing venture for the many public firms that the company’s founder, Michael Dell, courted for a takeover. Now, as Bloomberg noted in its report, the company is looking to make a private equity deal, which may not be the best option. Private equity deals are “about fixing a business and creating more value for the players involved,” correspondent Jon Erlichman explained on Bloomberg Television.