Like a commuter caught in an early evening traffic jam, Dell (DELL +0.00%) stock is stuck under $13.65 a share. Investors don't believe Carl Icahn's $14 bid is serious, even if the fight between Icahn and Michael Dell is all that and more.
"Can you imagine a real estate broker running advertisements warning of termite danger in a house each time a prospective buyer seems interested?" Icahn wrote in an open letter to shareholders.
He's referring to a late March filing in which Dell described its prospects as bleak enough to require a total overhaul of the business, an overhaul best executed as a private entity. Who's right?
Let's address that question in context. Here's a by-the-numbers look at how Dell stock compares to peers Apple (AAPL 0.01%) and Hewlett-Packard (HPQ 0.65%):
| Key Statistics | Dell | Apple | HP |
|---|---|---|---|
|
Current share price |
$13.48 |
$432.25 |
$25.44 |
|
Shares outstanding |
1.76 billion |
938.6 million |
1.93 billion |
|
Market cap |
$23.7 billion |
$405.5 billion |
$49.1 billion |
|
Trailing P/E ratio |
12.74 |
10.31 |
Not available |
|
PEG ratio |
2.24 |
0.52 |
Not available |
|
Gross margin |
21.1% |
39.5% |
23.6% |
|
Cash from operations |
$3.38 billion |
$55.26 billion |
$13.02 billion |
Sources: S&P Capital IQ and Yahoo! Finance.
And here's what Fools say, going by the data available in our CAPS investor intelligence database:
| CAPS Category | Dell | Apple | HP |
|---|---|---|---|
|
CAPS stars (out of 5) |
** |
**** |
** |
|
No. of CAPS ratings |
5,686 |
30,076 |
3810 |
|
Bullish CAPS ratings |
3,982 |
27785 |
3406 |
|
Bearish CAPS ratings |
1,704 |
2291 |
404 |
|
Bull ratio |
70% |
92.4% |
89.4% |
Source: Motley Fool CAPS.
Fools have expressed mixed views of the Dell's go-private plan for months. The last CAPS All-Star to weigh in abandoned the stock in April. "PC sales [fell off] much steeper than I expected," wrote Flygal5 in giving the stock a thumbs-down rating in CAPS. "I was wrong on this one, got to stop listening to Southeastern Asset Management."
Ouch! I'm not so sure Southeastern deserves such harsh criticism.
Verdict: Sell Dell stock now
And yet it's worth noting that Southeastern has sold half its stake in Dell to Icahn. Explaining the move in a statement to Businessweek, the firm said Icahn is "in the best position" to lead the fight for a better offer. I suppose just saying "we have to move on" would have been too forward?
To be fair, those holding on are still due a dividend payment yielding 2.4% annualized. Dell also continues to partner with Oracle for serving data centers and other larger-size customers. There's plenty of life left in the business.
But can Icahn force a sale above $13.65 a share? I don't think so. Not with Southeastern moving to the sidelines. Do you agree? Let us know what you think of Icahn's chances, and whether you'd buy, sell, or short Dell stock at current prices, using the comments box below.
