Dell’s Got a Happy Buyout Buzz

After years of speculation, Michael Dell, CEO of Dell (NASDAQ:DELL), could be gearing up to take the company private. Two people with knowledge of the matter told Bloomberg on Monday the PC maker is in preliminary buyout talks with private-equity firms. In response to speculation, shares shot up over 13 percent.

The news comes at a critical time for the company. Dell’s heavy hand in the PC industry has moved from being a strength to being a weakness. Data from Gartner indicates that worldwide PC shipments in the fourth quarter fell 4.9 percent year over year. Dell claimed just 10.2 percent of the market compared to 12.2 percent last year, reflecting a 20.9 percent decline in shipments.

Even Hewlett-Packard (NYSE:HPQ), which has been blasted by analysts, investors, and industry observers, increased its market share for the period. HP controlled 16.2 percent of the fourth-quarter market, and shipments fell just half a percent. Lenovo, a Chinese multinational electronics company, increased its quarterly market share to 15.5 percent, and grew its shipments by 8.2 percent…

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“Tablets have dramatically changed the device landscape for PCs, not so much by ‘cannibalizing’ PC sales, but by causing PC users to shift consumption to tablets rather than replacing older PCs,” said Mikako Kitagawa, principal analyst at Gartner.

Those tablets, of course, are born on the back of Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOG). “Whereas as once we imagined a world in which individual users would have both a PC and a tablet as personal devices, we increasingly suspect that most individuals will shift consumption activity to a personal tablet, and perform creative and administrative tasks on a shared PC,” continued Kitagawa.

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DellIt would be presumptuous to say that the PC is dead, but Kitagawa touches on the fundamental shift in consumer electronics. Desktop computers will become increasingly rare, and increasingly shared devices. One computer can do more now than it ever could, and most light-weight tasks that required users to log a lot of face time with a PC can now be accomplished on smartphones, tablets, and laptops.

Laptops themselves face an iteration of the same trend. As smaller, cheaper devices become more powerful, larger devices are less necessary. As a result, Dell and other PC makers have made a mad dash to diversify their revenue streams. Dell’s problem is that it may be a little slow to the game. HP has had its turn-around breaks on for a few years.

But Dell is making progress into the brave new world. Buried in the buyout-hype is the announcement of Dell’s Cloud Client Computing for Retail service, the “the retail industry’s most comprehensive, end-to-end, customizable solutions to help retailers transition to a cloud-based environment.”

Leave it to a press release to over-inflate its own product, but the service is right in line with Dell’s small-business angle. The service “offers a unique one-stop-shop model for all in-store cloud needs, including endpoint devices, networking, security, virtualization, infrastructure, management tools and services.”

This is exactly the type of product that Dell needs to be releasing to cushion a decline in PC sales. But, at the end of the day, going private is still a gamble. The company’s problems are rooted in competition and market trends, not necessarily in poor management or a bad balance sheet.

Don’t Miss: Tablets Deliver Another Blow to the PC Industry.