Can Dell Soar on the Cloud?

When people think Dell (NASDAQ:DELL), it’s likely most of them think PC, and a number of other people might have massive leveraged buyout on the tips of their tongues, but there’s one thing a lot of people might not think: cloud-computing game-changer.

Dell’s current situation

After tablets and smartphones hit the scene, PC sales stopped doing so well. In the slump, the No. 3 computer maker, Dell, lost 40 percent of its market value after a peak last year. Now Dell is looking to change things up, add appeal, and fulfill the technology needs of corporations.

Unfortunately for Dell, big changes are tricky to make under the scrutiny of investors, so the company has been seeking a leveraged buyout, which could allow it to make mergers and acquisitions to turn the company around. However, considering Dell’s size, worth, and the average premiums paid on recent technology leveraged buyouts, Dell’s enterprise value could climb to over $22 billion. A company so big could prove hard to buy out.

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For this reason, there are many who don’t think a leveraged buyout of Dell will ever happen, with one analyst at CreditSights estimating less than 50 percent odds. But the buyout firm Silver Lake Partners appears to be positioning itself for the buyout, and Dell’s 14-percent-stakeholder, founder Michael Dell, may also be pivotal in seeing that a deal goes through to take the company private…

An unexpected avenue

The trend in technology is for things to get smaller and more powerful — the pocket-sized smartphones of today have power that could best some of the biggest, most expensive computers of 10 years ago. Another trend that’s been taking root recently is the move toward the cloud, and Dell hasn’t been caught unaware.

A new Dell device could be the game-changer that reverses falling sales in the PC unit, but the device is not necessarily a PC. Dell’s project, named “Ophelia,” is a cloud-computing USB device. In other words, the device plugs into a display and connects to the cloud via the Internet so all computing is done in the cloud and shot back to Ophelia to be displayed on whatever screen Ophelia is plugged into.

There’s nothing else on the market quite like it, and Ophelia could change the way people think of computers — it could be the beginning of a revolution. Ophelia may be able to help Dell improve its cloud-based customer base, which consists mostly of federal and local governments. Dell could even reach the corporations it had been hoping to by pairing its cloud services and cloud-based computer and offering them to corporations that might otherwise seek cloud services from companies like Oracle (NASDAQ:ORCL).

Though the new device hasn’t yet launched, still just running under a codename, Dell seems to be moving ahead on the project. Dell’s VP of cloud operations, Tarkan Maner, was even able to suggest a price-tag for the device of $50, which suggests it may be getting close to distribution.

If Dell is successful with Ophelia, and no one else beats them to the punch, the company may become more appealing to firms considering the leveraged buyout, or Dell may even find itself in a position where it no longer needs to consider a buyout.

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