Dell going private

So it's announced this morning that Dell will go private, paying 13.65 per share to existing shareholders. What puzzles me is that its stock still trades at 13.39 as of right now. Is this the most obvious sure bet or am I missing something here?

I did something similar with Ancestry.com (ACOM). Bought at $31.49 after they announced a merger at $32.00. I think the risk is that the deal may not be approved, and even if it is it can take months for the deal to go through so your money is tied up during that time.

They're waiting 45 days to solicit competiting offers and based on the current stock price, the market doesn't feel other offers will come.

You're putting your money on hold for 45 days with the risk that the deal will fall through.

who in their right mind would buy Dell for 25bil?!

RiceBOX said:   who in their right mind would buy Dell for 25bil?!

Michael Dell, Microsoft, and private equity. Then they'll flip it in 3 - 5 years for $50B and laugh all the way to the bank.

RiceBOX said:   who in their right mind would buy Dell for 25bil?!Closer to $20b net of net cash. They generate $4b in EBITDA and almost the same amount in operating CF...they are basically betting that tablets won't cause them to go broke in the next 5 years.

it isnt. a tablet or whatever is really just an additional device.

jkimcpa said:   RiceBOX said:   who in their right mind would buy Dell for 25bil?!Closer to $20b net of net cash. They generate $4b in EBITDA and almost the same amount in operating CF...they are basically betting that tablets won't cause them to go broke in the next 5 years.

And how much Debt and other liabilities do they have?

jkimcpa said:   RiceBOX said:   who in their right mind would buy Dell for 25bil?!Closer to $20b net of net cash. They generate $4b in EBITDA and almost the same amount in operating CF...they are basically betting that tablets won't cause them to go broke in the next 5 years.

Dell pretty much gave up on tablets 2 years ago. Their notebook/desktop days are numbered.

Still profitable within the past years. I don't see what's so bad about buying it.

(13.65-13.39)/13.65 = ~2% gain

Itll take 6 months to close, minus commissions, means youll end up with about 3.5% IRR. Thats why its not at 13.65

Heard earlier that someone with approximately 14.4MM shares (~1%) is not pleased with the price and has requested a meeting with the board. Calling for a price in the mid-20s.

NET1 said:   Heard earlier that someone with approximately 14.4MM shares (~1%) is not pleased with the price and has requested a meeting with the board. Calling for a price in the mid-20s.

LOL, reminds me of Microsoft offering to buy Yahoo at $31/share (over 50% more than the then-current $19/share price) because it "massively undervalued" the value of Yahoo.

Five years later, Yahoo is still less than $20/share, proving once and for all that success in business has more to do with luck than skill...

agielchinsky said:   If you don't like the stock you might want to consider buying some Dell bonds. The 25 year ones were going for about 7% today, though this is a leveraged buyout so they are loading up on debt and increasing the chances of default.Careful: Dell Bonds Slump Following LBO Details
"Existing bondholders are “likely to be structurally subordinate to most of the new LBO debt,” according to a CreditSights’ Jan 21 report.

jugaaad said:   jkimcpa said:   RiceBOX said:   who in their right mind would buy Dell for 25bil?!Closer to $20b net of net cash. They generate $4b in EBITDA and almost the same amount in operating CF...they are basically betting that tablets won't cause them to go broke in the next 5 years.

Dell pretty much gave up on tablets 2 years ago. Their notebook/desktop days are numbered.

If Dell fails, it's because they make a shoddy product, not because the PC is dying. People still buy computers for personal use, of course (nor will they stop unless tablets become MUCH more powerful and user-friendly for gaming and productivity), but more importantly every business in the world uses desktops and laptops for their everyday business.

Athenakt said:   I agree, the PC isn't dying quite yet.

I love my tablet; it gives me lots of freedom and is a great tool in addition to my home computer. What it doesn't give me are 24GB RAM and Terabytes of HD space.

In a few years tablets might be that high-end. But by then, PCs will have Terabytes of RAM and Petabytes of HD space with software complex enough to need those resources to run well. 3D printing, anyone?

Thats the problem NOW.

PC do not need TeraBytes of RAM. That is just PURE lazy PROGRAMMING. Really pisses me off all the memory hog programs running nowadays. I remember having to load different programs in different order upon boot, in order to use contiguous ram space (back when it was single digit MBs of RAM. The creation of extended memory space has been the worst thing for PCs.

Also, not everyone needs or wants 3D printing. SO the memory requirement should be in the device (printer), not in the computer.

agielchinsky said:   If you don't like the stock you might want to consider buying some Dell bonds. The 25 year ones were going for about 7% today, though this is a leveraged buyout so they are loading up on debt and increasing the chances of default.

Right, with the common stock, you know it will be redeemed if deal goes through. Correct me if I'm wrong, but if you have Dell bonds, its almost as if the conversion to private company is a non-event. Well, except for the fact that there is a higher chance of Dell going under if liabilities are too much for it (and so, your value of bonds will decrease)

Venturion said:   CptSavAHo said:   Queue stories of "I remember when 512k of RAM was $xxxx!"..... My first computer had no hard drive. You had to load the OS from a floppy.

My first hard drive was external... a 20 MB External HDD for a Commodore (which loaded programs from CASSETTE TAPE)... it cost $7xx.00 (yeah, SEVEN HUNDRED bucks for a 20 MEGABYTE Drive).

jkimcpa said:   Athenakt said:   I agree, the PC isn't dying quite yet.

I love my tablet; it gives me lots of freedom and is a great tool in addition to my home computer. What it doesn't give me are 24GB RAM and Terabytes of HD space.

In a few years tablets might be that high-end. But by then, PCs will have Terabytes of RAM and Petabytes of HD space with software complex enough to need those resources to run well. 3D printing, anyone?Not everyone is a torrenter. However the computers are so strong these days there is no need to upgrade for a while. I upgraded to a touch screen all in one with windows 8 and it's a POS. I definitely see PCs making a decline, but servers/business machines will chug along.

Yep, the companies that are in the cloud (AWS, Google, MS, Rackspace, et al) are the ones that will be buying boatloads of servers as Cloud ramps up. Those hardware companies that cater to consumers will be decimated as tablets could do everything 75% population needs to do, keep in mind that the pie is shrinking in PCs, so to fight over smaller growth isn't feasible for large companies, hence, Dell and HP trying hard to switch from consumers to business support.

scottybweyy said:    Venturion said:   CptSavAHo said:   Queue stories of "I remember when 512k of RAM was $xxxx!"..... My first computer had no hard drive. You had to load the OS from a floppy.
Now your hard drive is pure gold! Nah.. I took the profit from trading 2,500+ oz and turned it into 530 H.P.

After this week's Barrons article, this seems solid.
- Right time to buy, -30% appreciation over past 12 months
- $5B in cash outstanding on $23B market cap
- Underwritten LBO annualized return is 30% assuming no increase in OP earnings
- Current P/E is 8