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How Dell Inc. (DELL)’s Deal Moved the Dow Today

Dell (DELL)So Dell Inc. (NASDAQ:DELL) made reality out of a long-running rumor, agreeing to let founder and CEO Michael Dell take the company private again. Assuming it passes muster in regulatory reviews and shareholder voting, the $24 billion blockbuster deal will reshape the landscape for PC and server systems in a hurry.

The news even helped spur the Dow Jones Industrial Average today, even though Dell isn’t part of that august index. You see, Dow component Hewlett-Packard Company (NYSE:HPQ) was eager to take advantage of the situation. The system-building rival had plenty of time to cook up a timely press release, since Dell’s deal has been widely expected for weeks. HP’s missive is short and sweet:

Dell has a very tough road ahead. The company faces an extended period of uncertainty and transition that will not be good for its customers. And with a significant debt load, Dell’s ability to invest in new products and services will be extremely limited. Leveraged buyouts tend to leave existing customers and innovation at the curb. We believe Dell’s customers will now be eager to explore alternatives, and HP plans to take full advantage of that opportunity.

See what HP did there? According to the statement, Dell will have a tough time innovating over the next few years, not to mention supporting its current customers. Expect lemming trails of clients moving away from Dell and over to alternative providers such as, oh, I don’t know — HP, perhaps? Yeah, that’s the ticket.

The obvious target audience here isn’t Wall Street, but nervous Dell customers. Regardless, the press release helped HP shares jump 2.1% overnight. That’s the third-largest gain on the generally strong Dow today, adding three points to the index’s value.

I’m not at all convinced that the Dell deal will have the market impact HP describes here. Most leveraged buyouts don’t include significant investments or deep personal involvement by the target company’s CEO and founder, after all. Michael Dell has plenty of incentive to keep the competitive fires burning under his baby.

No matter. The market may be a long-term weighing machine, but it often demonstrates knee-jerk reactions to dramatic news like this deal. Enjoy the jump today, HP — deserved or not.

The article How Dell’s Deal Moved the Dow Today originally appeared on Fool.com and is written by Anders Bylund.

Fool contributor Anders Bylund holds no position in any company mentioned. Check out Anders’ bio and holdings or follow him on Twitter and Google+.
The Motley Fool has no position in any of the stocks mentioned.

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