Time to Jump Ship: Dell Inc. (DELL), Hewlett-Packard Company (HPQ)

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The Bottom Line

There is no easy or pertinent way to calculate a fair price for Dell Inc. (NASDAQ:DELL). If the company is being taken private that obviously means the acquirers want a return for the mammoth amount of capital they are investing and the huge risk they are taking by investing in a failing industry. That said, there are differing opinions on this deal, and I will reserve my judgment. But I believe that at these levels the best option for investors is to sell the stock and get out simply because of the high risk attached to the company. There is a possibility that the shareholders will negotiate a higher price for the company, but if the bid is withdrawn the stock price will fall dramatically. Minus the takeover speculation, the stock has been consistently trading under $12.

The situation in the PC industry is getting worse every day, and the last quarterly results of Dell Inc. (NASDAQ:DELL) were bad, to say the least. There are chances that the bid price will be slightly increased, maybe somewhere around $15. On the other hand, if the deal falls through the stock can come crashing down to $8-$9, or even lower, if more bad news comes from next quarterly results. Therefore I recommend that investors make good use of this rally and get out. Dell Inc. (NASDAQ:DELL) has become a highly risky investment at this stage both due to the sinking PC industry and uncertainty surrounding the buyout deal.

The article Time to Jump Ship originally appeared on Fool.com and is written by Mohsin Saeed.

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