Dell Inc. (DELL): An Undervalued Tech Giant

Page 1 of 2

Dell (DELL)A lot of Dell Inc. (NASDAQ:DELL) shareholders are unhappy and they have a good reason to be. CEO Michael Dell and equity investment firm Silver Lake are offering to buy out Dell shareholders at a price of just $24.4 billion, or $13.65 per share. Southeastern Asset Management, T. Rowe Price Group, and other major Dell shareholders have declared their opposition to the proposed buyout deal.

Overall, the proposed deal undervalues Dell. In the trailing 12 months (TTM), Dell earned $1.48 per share. Thus, Michael Dell is offering to buy the company at a PE of just 9.22. Taking into account Dell’s negative tangible book value per diluted share of about $1.44, the offer, based on TTM earnings, is a PE of 10.20. The offer looks even worse when using fiscal year 2012 earnings. In FY 2012, Dell earned $1.88 per diluted share, which translates to a buyout PE of just 7.26. Taking into account the negative tangible book value, the offer is a PE of 8.03 based on FY 2012 earnings.

Struggles and PC transition

Dell has been struggling. In Q3 FY13, Dell posted declines in net income and non-GAAP net income of 47% and 31% year over year, respectively. Revenue from Desktop PCs and Mobility fell by 25.8% and 8.5% year over year, respectively. While the PC industry is also struggling, Dell has been performing worse than the industry. According to IDC, Dell’s total PC shipments dropped by 20.8% in the holiday quarter. In comparison, total PC shipments declined by 6.4%. Furthermore, the rise of the mobile device industry remains a big threat to Dell.

While there are significant problems with Dell, Michael Dell is taking advantage of the situation. The desktop PC industry is still crucial to the modern world. In Q4 2012, almost 90 million PCs shipped worldwide and Dell was the third largest PC vendor worldwide. Also, Dell was the third largest server vendor worldwide in Q3.

In addition, the PC industry is in a transition period. Microsoft Corporation (NASDAQ:MSFT) launched Windows 8 during the holiday quarter, an important step because the OS’ Modern UI makes it suitable for tablets. Currently, the tablet market is booming and is dominated by Apple Inc. (NASDAQ:AAPL) and Google Inc (NASDAQ:GOOG) Android. In Q4, tablet shipments increased by 75.3% year over year to 52.5 million units. Apple’s unit shipments rose to 22.9 million, but its market share dropped to 43.6%. On the other hand, Android continued its surge. ASUS, which is selling the Google Nexus 7 tablet, saw shipments increase by 402% year over year to 3.1 million units.

Page 1 of 2

Dividend Stock Alert - Billionaire Robbins' Top Dividend Idea With 70% Upside Potential

Get Paid 3.5% Per Year While Waiting For The Stock Appreciate 70%

Larry Robbins' Glenview Capital Opportunity Fund returned 101.7% in 2013 and Robbins personally made $750 million. The same fund returned 25.3% in 2014. In this FREE REPORT we will share Robbins' top dividend idea that yields 3.5% and has been increasing its dividends for 39 consecutive years. Robbins thinks the stock has the potential to appreciate 70%.

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Click here to Read Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 74 percentage points in 2.5 years. Our beta is only 1.2 (download a FREE newsletter and see the details inside)

Lists

Best Selling Magazines in the World

Shortest People in History

The Most Celebrated Holidays in the World

Most Expensive Handbag Brands in the World

Top Selling Comic Book Issues of this Century

The Most Powerful Women in Politics

Best Paid DJs

Most Rebellious Female Artists

Best Paid TV Actresses of 2014

Best Paid Actors of 2014

Most Expensive Horses in the World

Tallest People Ever

Most Encouraging Feminist Celebrities

Best Paid Supermodels of 2014

Top 10 Suburbs for Retirement in 2015

10 Wealthiest Cities in America

Top 10 TED Talks for Entrepreneurs

Best TED Talks on Education

25 Most Dangerous Places to Live in America

Top 10 Ski Resorts in the United States – 2014 List

Top 10 Most Remote Places in the World

Most Visited Museums in the United States

Wealthiest Photographers in the World

Most Famous Gay Athletes

The World’s Most Famous Circuses

Best Hair Stylists

Most Popular NASCAR Drivers

The Best Romance Movies of all Time

The Most Wanted Drug Lords

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!