Dell, once the world’s biggest producer of personal computers, is now about to stop trading its stock and go private. The company is looking for a new direction as tablets are replacing conventional PCs.
Dell Inc. is reportedly in talks with private – equity firms Silver Lake Partners and TPG about the buyout, according to The Wall Street Journal (WSJ).The have been going on for the last two or three months, and the talks could turn into a deal within the next 6 months, according to the media sources. Other investors including pension funds could also join the deal, with an exact list of the bidding group remaining unfinalized.
Dell's "valuation is off the charts low," WSJ quotes one industry executive.
The shares of the PCs producer lost above 30% during last year, as it’s suffering a painful shift in the industry.
In 2006 Dell lost its market championship, which was coupled with brand new gadgets such as smartphones and tablets grabbing consumer attention.
So – called new era gadgets have never been the focus of Dell’s operations, as PC sales still produce more than a half of the company’s revenue at a time when conventional computers seem to be going into oblivion. PC shipments fell 4.9% year on year in 4Q 2012, with Dell’s alone suffering a 20.9% decline, according to research firm Gartner.
The drop ate the into Dell’s bottom line, as its profit fell 47% year on yearin the quarter ended November 2.
At a meantime, other technological companies like Apple and Samsung that have led the tablet and smartphone boom and are boasting record high financials.
Experts agree that tablets are now winning the market, with conventional PCs likely to be abandoned altogether.
"Whereas as once we imagined a world in which individual users would have both a PC and a tablet as personal devices, we increasingly suspect that most individuals will shift consumption activity to a personal tablet, and perform creative and administrative tasks on a shared PC," says Mikako Kitagawa, senior analyst at Gartner.
Investors were upbeat about Dell’s plans to go private, as its shares jumped on the news the company held talks of a buyout.