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Is It A Good Time To Buy Dell Shares?

Mar. 07, 2013 9:56 AM ETDELL-OLD
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Dell is about to become a private company and this means that potential buyers are putting the company under a careful scrutiny to determine its real worth. Right now the stock is trading at slightly below $14 per share, and some analysts estimate that the company will sell at a valuation of roughly $24 billion, which would equal a $13.65 per share. At a first glance it might look like binary options traders should jump on the bandwagon right now and bet on the stock value to plummet. There are some arguments in favor of such a decision, but also enough that suggest the contrary.

What Caused the Lengthy Dell Slump?

For a company that innovated the industry since its inception, it might come as a surprise the fact that Dell missed out on numerous opportunities. It's been the uncontested leader in the PC business, with the only real competition being HP, but right now the company is only a shadow of its former self. In the early ages, it improved the PC experience and in conjunction with their tight supply chains, they were among the first to introduce brand-new concepts.

Unfortunately for Dell, not all of the innovative ideas gained traction and the biggest hit came from failing to capitalize on the increasingly high support for the mobile market. Tightly saddled in its business and focusing exclusively on personal computers, Dell entered a downward spiral in 2006 and its sales plummeted as a result. Privatization seems to be the only way out for the company, and if things go as planned by Michael Dell and other key investors, it might redeem itself.

The Reasons to Go Against the Flow

Dell announced revenues exceeding $56 billion and its shares rose slightly, with the analysts predicting an increase of more than $1.6 per share this year. Right now, their stock is neither cheap nor expensive which further complicates the mission of binary options traders looking for value in Dell positions. What changes the game plan completely is the announced privatization, but the question on everyone's lips is whether the company will sell to its premium value or not.

In order for the buyout to be successful, Michael Dell and the investors need to determine whether they will buy Dell at $24 billion as estimated, or for an amount that will exceed $30 billion. While being a public company is a necessity, the investors would benefit from a stock price in excess of $16 per share and this should prompt binary options traders to bet on a steep increase in shares price. Some shareholders have asked for share prices of almost $20 but although this is not a feasible scenario, there are plenty of indicators that Dell won't sell at the estimated $13.65 per share.

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