Dell shares soar on back of buyout rumours
Sources claim firm could be set to go private, so it can conduct its transition to becoming a service provider in private.
Dell's fortunes have waxed and waned. Since Michael Dell founded the company in 1984 out of his college dorm room with $1,000, the company has grown into a global PC powerhouse that pioneered just-in-time inventory management and online sales of custom-built computers.
But when Dell handed the reins of his company to long-time lieutenant Kevin Rollins in 2004, sales and customer service began to slip. With the board's blessing, Michael Dell returned in January 2007 to turn his company around, only to run into the global recession and a shift by consumers toward powerful, mobile devices like tablets.
At a Sanford Bernstein investors' conference in 2010, Dell said he had considered taking the company private. He told investors at the time that a transformation of his company that he had hoped to effect upon his return was "incomplete."
Those comments triggered a round of speculation, but most analysts said buying out such a large company would be difficult because of the massive financing requirements.
Michael Dell now owns 244 million shares in the company, according to Thomson Reuters data, and last year was ranked the 22nd richest American with a fortune of $14.6 billion.
Dell's stock soared to an intra-day high of $12.83 in afternoon trade - the highest since May 2012 - after a brief trading suspension. It closed at $12.29.
Its traded bonds also came under pressure over fears of a significant hike in leverage. Its 4.625 percent, 2021 bonds were trading 80 basis points wider at 210 basis points over U.S. Treasuries, while its 2.3 percent, 2015s were about 30 basis points wider at 88 basis points over Treasuries.
"It can be difficult to realise the full value of various corporate assets ... during transition periods, and executing on a long-term transformation as a private company could have advantages," argued ISI analyst Brian Marshall.
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