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Los Angelas, CA -- (SBWIRE) -- 01/16/2013 -- Dell Inc. (NASDAQ:DELL) is trading at unusually high volume Wednesday with 48.4 million shares changing hands. It is currently at two times its average daily volume and trading down 56 cents (-4.3%) at $12.60 as of 11:41 a.m. ET.
Dell has a market cap of $21.35 billion and is part of the technology sector and computer hardware industry. Shares are up 21.2% year to date as of the close of trading on Tuesday.
Dell Inc. provides integrated technology solutions in the information technology (IT) industry worldwide. The company has a P/E ratio of 8.4, below the S&P 500 P/E ratio of 17.7.
Dell (NASDAQ:DELL) private "is unlikely to get far on the assembly line." Indeed, with Dell's current market value at roughly $23 billion, a going-private transaction would be the largest tech leveraged buyout, or LBO, ever, as well as the largest LBO of any kind since the onset of the credit crisis.
On Tuesday, it emerged that one of the firms discussing an LBO with Dell is Silicon Valley private-equity firm Silver Lake Partners. Silver Lake is an experienced hand in this area, having led what was then the largest technology LBO -- an $11.3 billion consortium deal for SunGard Data Systems. The firm is in talks with four banks to provide the financing on the deal.
Nevertheless, the odds of completing the deal -- or earning a decent return on it, should it go through -- remain highly uncertain. Prior to the news of the deal, Sanford Bernstein analyst Toni Sacconaghi suggested that Dell was worth $12 a share on a sum-of-parts basis, with the PC business representing $4.70 per share. The trouble is that the latter value seems to be melting like an ice cube in the desert. On Monday, research firm Gartner released fourth-quarter PC shipment data, and the numbers were edifying: Year on year, the total number of units across the industry contracted 5%. Dell's performance was blood-curdling, as the company shipped 21% fewer units -- the worst performance of any major manufacturer.
Dell pioneered a direct-to-consumer sales model relying on just-in-time manufacturing. However, with the industry adapting and shifting east, the predator has become prey. Dell's current share price does not provide an adequate margin of safety to account for the decline of its PC business. SunGard, which Silver Lake Partners has kept private significantly longer than a typical LBO, ought to provide an object lesson regarding the risks of a Dell deal.
What Are DELL’s Charts Signaling For Traders? Find Out Here
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