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Dell's Shares Surge On Rumors Of Private-Equity Buyout

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Two years after Michael Dell said he had considered taking his personal-computer company private, Dell Inc. is reportedly in talks with two private-equity firms – news that sent Dell’s shares soaring.

While Dell is in preliminary talks with two firms about going private, no deal may happen as the firms might not be able to line up the financing needed or “resolve how to exist the investment in the future,” Bloomberg News reported today, citing two people familiar with the matter.

Michael Dell, who founded Dell out of his college dorm room in 1984, retook the CEO job in 2007 after sales faltered as rivals including Hewlett-Packard figured out sooner that computer users wanted stylized notebooks instead of the lost-cost, utilarian machines Dell was churning out. As part of his turnaround effort, Dell, 47, has been buying his way into new markets, acquiring storage, services and software makers to diversify away from the low-profit PCs that make up the majority of the company’s sales. That progress has been slow, and Dell, the world’s third-largest maker of PCs behind HP and Lenovo, still gets almost half of its revenue from PCs.

Dell spokesman Jess Blackburn had no comment on reports about a possible buyout, saying the company doesn’t comment on rumors and speculation.

Investors, though, showed what they thought of the idea by sending the shares up as much as 18 percent to an intraday high of $12.83. They closed up 13 percent, or $1.41, to $12.29 in regular Nasdaq trading and continue to be up slightly in extended trading. Dell's shares lost about 31 percent of their value last year as buyers opted for tablets and smartphones instead of PCs.

Michael Dell owns 15.7 percent of the company, “making it easier for firms to put together equity financing for the deal,” Bloomberg said, citing one of its sources. The company’s market value, after news reports about a possible deal Bloomberg, rose to about $21.5 billion. 

Market researcher Gartner Inc. released fourth-quarter PC shipment data today, showing that Dell was the biggest loser among the top 5 worldwide PC makers as its shipments fell 21 percent from the same quarter in 2011. In the U.S., where it ranks second behind HP, Dell's shipments fell 16.5 percent, Gartner said.

Dell spoke about taking the company private at a Sanford C. Bernstein & Co. investors event in June 2010, just three years into his turnaround effort. At the time, Dell said he planned to keep running the company and working on reviving growth. “"This transformation is incomplete," Dell said at the time. "If I had to give it a grade, I'd give it an incomplete."