Dell shares jumped 16 percent Monday after Bloomberg reported that the company has started talking buyout with private-equity firms.
The Round Rock, Texas-based vendor has had discussions with at least two firms, Bloomberg reported, citing two sources with knowledge of the matter. Discussions are preliminary and could fall apart because the firms may not be able to secure the financing, according to the article. Still, it was enough for Wall Street to send Dell's stock skyrocketing.
Shares were trading at $12.30 Monday, up $1.42 or 13 percent after reaching a high of $12.83 during the day.
Dell shares lost almost one-third of their value in 2012, closing the year at $10.14, down $4.49 compared to the end of 2011. At the end of the first quarter, Dell shares had reached $16.81.
At least several big Dell partners favored a move by the company to go private.
"I think it's a great thing ... when you think of all the business hindrances that are imposed on a company once they go public," said Bob Venero, CEO of Future Tech Enterprise, a Holbrook, N.Y.-based VAR.
Public companies need to spend considerable resources to address, adjust, report and deal with the emotional aspects of the economy and stock market, Venero said. That sometimes stops a company from really investing in its vision and direction and puts them more into an operational and tactical mode, he added.
"In my opinion, freeing Dell from the shackles of the public stock world can allow for additional investment and resources in the areas that can spur growth, innovation and real business decisions that are more strategic in nature," he said.
Bob Hochmuth, vice president of sales at SL Powers, a Boca Raton, Fla.-based VAR and Dell solution provider, added that going private could make Dell a more flexible business.
"We've had Watchguard go from public to private, and it didn't affect us in a negative sense at all. If anything, maybe private is better because you can be more nimble," Hochmuth said. "You're not focused on all the government reporting and everything else. You can just change direction. I remember [Watchguard executives] saying it was nice to focus on business and not compliance."
Sonia St. Charles, CEO of Davenport Group, a St. Paul, Minn.-based Dell partner, said the move to go private would be a "brilliant strategy" since the market continues to view Dell mostly as a PC maker.
"Dell is doing all the right things, and going private will allow them to focus on integrating their acquisitions and concentrate on their long-term strategy, without having to manage the Street's quarterly expectations," St. Charles said.
Hal Jagger, vice president and general manager of corporate sales at SHI, a Somerset, N.J.-based VAR concurred.
"For Dell, I think it's a fundamentally good thing. Michael [Dell, CEO,] has been trying to remake the company from a traditional notebook/desktop/server-based company to something focused on their own IP," Jagger said. "They're doing a lot through acquisitions, and to be able to do that transition from a systems-based model to a full, end-to-end IT solutions manufacturer, it would be easier not having to deal with the quarterly pressure of Wall Street and allow them to take a long-term approach."
PUBLISHED JAN. 14, 2013