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Dell Inc. (DELL): Should Investors Take Michael Dell’s Deal?

Michael DellThe saga surrounding Dell Inc. (NASDAQ:DELL) heated up when activist investor Carl Icahn sweetened his offer. In an effort to thwart Michael Dell’s attempts to take the company private, Mr. Icahn has upped the ante.

Icahn, who owns nearly 9% of Dell Inc. (NASDAQ:DELL), claims Michael Dell’s $24.4 billion, or $13.65 per share offer, undervalues the firm. Icahn’s fresh proposal adds warrants to his proposal. Initially, he suggested Dell Inc. (NASDAQ:DELL) “self-tender” its stock for $14 per share. Then he decided to revise the offer to add one warrant for every four shares. The warrants give holders the right to buy one share of Dell Inc. (NASDAQ:DELL) for $20 over the next seven years. Icahn claims the entire deal is worth some $15.50 to $18 per share.

But, why anyone would want to own more shares of Dell Inc. (NASDAQ:DELL)? The company is slumping and shares haven’t traded over $20 since September 2008. At best its prospects look dim.

PC shipments slump

According to data research firm Gartner, the PC market is in the midst of its longest decline in history. During the second quarter of 2013, worldwide PC shipments slumped to 76 million units, a 10.9% decline year-over-year. This notable decline marks the fifth consecutive quarter of waning shipments, the longest nosedive in the market’s history.

Per Mikako Kitagaqa, a principal analyst at Gartner,

“We are seeing the PC market reduction directly tied to the shrinking installed base of PCs, as inexpensive tablets displace the low-end machines used primarily for consumption in mature and developed markets. In emerging markets, inexpensive tablets have become the first computing device for many people, who at best are deferring the purchase of a PC. This is also accounting for the collapse of the mini notebook market.”

Tablets are taking over

Credit the growing popularity of Apple Inc. (NASDAQ:AAPL)‘s iPads and Google Inc (NASDAQ:GOOG)‘s Android smartphones as reasons for the PC market’s steep slide.

Apple Inc. (NASDAQ:AAPL) sold 22.9 million iPads in the first quarter, a 33% increase year-over-year. In addition, the company sold 47.8 million iPhones, representing a 23% year-over-year increase. Yet, despite those stellar gains, Apple’s shares, have tumbled.

Shares started their downward spiral right after the stock peaked in September 2012 at $705.07. Analysts, (citing production cuts), started mumbling the iPhone may have saturated developed markets like the U.S. and the U.K. The company is said to be working on two versions of the next-gen iPhone, one of which is believed to be a budget model aimed at developing markets.

Apple Inc. (NASDAQ:AAPL) shares slid 25.5% in the first half of the year. But, Raymond James Financial recently upgraded the stock to Strong Buy from Outperform. Noting attractive financials and compelling valuation, the broker has a $600 price target on shares.

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