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tv   Street Signs  CNBC  January 14, 2013 2:00pm-3:00pm EST

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>> his girlfriend is a professional tennis player. they have this thing going in the national media. she struggled a little bit last year, maybe, because of the romance. but i want to play -- we have a soundbite from nike itself on their commitment. listen. >> we became committed to golf the day we signed tiger woods. that was the day we made a significant investment in getting into the golf business. having an athlete like rory is just once again, another sign of how our busy involved. >> what does it do to titlist? nike clearly has two biggest names in the whole sport now. >> yeah. and they have done this in lot of dirent sport. they had coby. i guess they have lebron as well. they put a lot of money on one individual. >> they muscle in. >> sue, final thoughts? >> treading water, about about
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seven points but tech is weighing things down. that will do it for us, ty, on "power lunch." >> see you when you get back home. "street signs" begins right now. >> fiscal cliff just mind us and already, the debt ceiling fight is heating up. the president slamming republicans. is it possible america to really default? cash maybe king, but the king is dead. why people finally looking ready to take risks and why it may be good news for you. plus, from app toll ibm, hp and facebook. we are all over big time calls with big time stocks. we are going to show offer the new corvette. >> we have 30 s&p companies this week.
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>> nasdaq, as you can imagine, dragged down by apple. we will have more on both of those headlines later on. in the meantime, let's find out what is happening on the political side. john howard -- okay, we are going to john howard in just two seconds. but in the meantime, over to you. what is the president warning us about? >> president warning about the risk of default on u.s. debt. the question, is that a real possibility? president teaking tough questions at a press conference as well. first, to john harwood in washington with a retap of what the president had to say in a fairly wide ranging news conference. john? >> with a t was wide ranging and pretty blunt. the president saying he is taking too his guns. he is not negotiating with republicans, house republicans in specific, and says we are paying for bills we have already encourageed. republicans won't like that message either, but he said the idea that the debt ceiling could
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be used as ref wrath or a hostage situation to achieve a long-term debt solution is something he won't do. >> the united states of america not paying its bills, is irresponsible. it is absurd. as the speaker said two years ago pb it would be, and i'm quoting speaker boehner now, a financial disaster not just for us but for the worldwide economy. >> now what the president also challenged republicans to do was it come up with their own plan if they don't like his. house speaker boehner answered back very quickly and said the house republicans are going to do what responsible. we will keep the government running. meet our obligations and cut spending. so the question now, if the president is going to succeed as what we called breaking the
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habit, somebody has to break him. we will find out in a few weeks. we know the debt ceiling and extraordinary measures that the treasury is taking right now could be exhausted in as little as one month from now. >> coming down to the wire again. john harwood, thank you we much. let's bring in our own steve liesman. column nest at the american institute of dan greenhouse. both are cnbc contributors. steve, first to you here. all right, listen, you have the republicans saying essentially, we're not negotiating without spending cuts. president saying spending cuts are nonnegotiable off the table. how does this play out? >> i think they make a deal in the end. it is a real challenge it investors now to see through some of this. but what is really interesting to me is what happened over the weekend. what my reporting uncovered and
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what is out there in public statement is, really the administration is getting rid of the sort of quirky ideas that have been out. the platinum coin is off the table. issuing scripp or ious is off the table. digging in the trenches over the weekend, then the republicans came out and said, you know what, we are more serious about sending the country into default in return for spending cuts than you probably thought. >> it is interesting earlier on today, i tweeted out, what is the risk of a -- and amazingly, people tweeted back, absolutely 0%. and some people tweeted back, a hundred percent, this is going to happen. what do you think will happen? >> a debt default, not making those interest payment is zero. i think now they call wall
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street a detechnical default, w means you make the interest payments, but you have to find out what else to pay. you are not paying social security or this department, the odds of that for a few days, are probably busy. 20%, 30%, something like that. but i think at the end of the day, the deal made is a debt ceiling increase. but republicans will go through with those sequester cuts. >> yeah. if i could just come. jump in real quick. brian, bandy, jumping 06 of what jimmy had to say here, let's not forget, defaulting on the principle and interest obligation says separate conversation from defaulting on things to other people. say, sending out social security checks. in the context of quote unquote, defaulting on our debt, i'm with jimmy p. as well. missing an interest payment, a very low probability. >> that where some of the confusion seems to be, steve.
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exact lit public understanding. that why we are here at cnbc to what the risk really is. is someone not going to get their social security check? is the post office not going to be paid? what would happen first? >> brian, a lot of people don't understand because it is complicated. neither side of this depate want you to understand the reality here. on the one hand, the administration wants you to -- doesn't want you to know there are two options here. default on implications and then the other one. the republicans would like you to think, you know what, the other obligations is not a big deal. not something that will hurt the united states. we think we would earn the banana republic pin on our lapel. if there are obligations we have to make above and beyond our -- >> and i will tell you what, jimmy. this is what drives me nuts.
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lately we've heard the administration talk about stabilizing the debt. that's paying down the debt. we are talking about stabilizing. er with not talking about paying it down. we are talking about keeping it at the level it is. >> flat is the new down. >> bingo. >> sne want 75 to 78% of gdp. the president would keep it there for a decade but that's twice, more than twice, of what it was before the great recession. heaven help us if we have another recession. >> guys, jimmy, i hate it break in but we have breaking news. let's get straight it michelle at marketplace. what are we learning. >> that's the whole story, mandy. thanks very much. let's show you stocks that are halted. there are unconfirmed reports that dell may be in talks. it is not halted for news pending. it is halted due it volatility. can you see the move they made
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just before they halted the stock at the stock circuit breaker. back to you guys. >> thank you for that news, michelle. we will call analyst and try to get more comment on that. that's fascinating. >> herb, what the market cap on dell? 20 billion? so you would be looking at a fair valuation. i have to go into the data cap iq. any deal like that with technology, earnings before taxation, depreciation and ammortization. and we are are looking for guests on this. this would have to be private equity or consortium. is this a competitor along with a prif at equity form? that's my experience. folks, if these reports are
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true, this could be one of the biggest technology buyouts. who knows, this could be led by michael dell who has been frustrated by lack of return on his stock over the last decade. >> john, what are you hearing on this and who might be the possible buyout person? >> i haven't heard anything specific yet but this is something i touched on with michael dell. not something you shot the dor on. not something he said would he do. but the last time i sat down with him, it does come up. we have to see where this goes. dell clearly taking a beating in the markets. now, so you know, it opens up the possibility of this kind of thing but rumors get floated about. many companies an you never know which way we will go. >> dave, what do you make of this?
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>> it wouldn't surprise me if we saw a lot of chatter build up. there is a big trade we were listening to for a while that we saw a lot of movie moving out of dels and hewlett-packard. so we just need to see if there reallier private equity suitors. i will tell you the winner is hewlett-packard. and i believe the stock is going vertical, mandy. >> it is trading and there is quite a lot of movement. i think the chart was up 11 or 12%. in the meantime, we have jack joining us. jack, you have no doubt heard the headlines here. give us your take. even michael dell, if he was possibly going to be involved in the buyout, surely he wouldn't even have the cash, right? >> yeah. he would need help. it seems like it is a little bit
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like best buy to some degree. a firm that he's run for decades, that is lay bush for a while. seems to be past its prime technologically, and he is frustrated. he has gotten a couple pe itch vesto in/* investors and by his company back. >> it makes good sense because he can do this under the radar. if he really believes he has something that he can deliver on long-term at some point down the road. >> guys, i'm running back and forth to a computer. trying to get the valuation numbers on and find their debt net. if there is a consortium with dell. michael dell get involved and buy it out. could this set off a new wave of other buy outs of slow growth
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technology companies by a lack of returns. i'm thinking after little company in redmond, washington, which is too big to buy but maybe not too big to break up. >> these are companies that have a lot of cash flow. they have huge cash on the balance sheet. they can support debt. these companies don't typically have debt. i think microsoft was able to float five-year debt with less than 1%. clearly i think dell can get away with that. it may cult matly be the whole lbo wave all over again. >> for the second of the people just joininging us, number one we have an official statement from dell saying they don't comment on rumor and speculation. i guess that the normal thing you would expect them to say. number two, if a stock is up by 14%, is there one report that says there is news of a possible pe buyout of dell. >> yes.
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so take this with a grain of salt, folks. dell, one headline, one report on the name definitely moving the stock. and with the stock that hasn't done much the last decade, it is obviously believed. >> it is just talks. rumor of talks. >> you slap a slight premium on that deal and you talk about a consortium of the biggest private equity firms in the world plus michael dell to front it as well. this is an extremely difficult deal it get done. we have talked about best buy often. we have talked about how do we raise that money on a slow growth. but descent cash flow business. >> best buy and dell, i'm not saying they are analogous but there are similar situations. huge run of the 90s. plateaued. good free cash flow. but not a lot of growth. a naturally attractive target if you find the capitol. jack, do you believe there is capitol that would want to develop something like a dell? >> yeah, i believe it.
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like i said, it probably has a huge balance sheet with cash. i don't think dell has any debt. so i see no reason why companies could probably come in with less equity than you think brian. this could support dae sent sized debt mode on your own. >> you're right. you could pull a nabisco on this thing, right? >> yeah. you will ruin the business. but you can do it. >> michael dell is a great salesman. one thing he has said consistently is it's not going to be tomorrow. if he can get the private equity guys to believe and buy into it, why not, brian and i like what jack said about lbos. it's time. >> this is a bloomberg report and dell talked to two firms about a possible buyout. we are getting more
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clarification and details. but stock is up over by just 12% in the trade right now. >> nice move. >> yeah. >> it really is. jack, i think you brought up a good point. let's say the story is accurate and the deal gets done, right? they take it private, it will come out at some point, that's how pe firms make their money. reipo this thing. but have you to be careful. if that happens, a dell levered up is not dell now. >> a dell levered up is a higher price earnings ratio and substantially higher price earnings growth to the average investors looking say being with look what we did, we were able to grow, using financial leverage maybe. an enormous amount of growth. >> good time for know have my dell juke box. >> right. i think michael dell is probably you know, obviously invested in the company both financially but also emotionally. and -- >> you're right. he is a good salesman. >> david, very quickly, i think
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you're still there. >> yes. >> a buy rating already. but do you recommend client sit on the said side lines with this deadline with dell. >> i would wait for more clarification out there. this is a typical reaction out of the market. we have been seeing dell an h h hewlett-packard on the upside. huge deal, one bloomberg reporter. all speculation right now. doesn't feel like a there is a tre mend oo tremendous amount of teeth on it. i will probably be on the side lines. >> what i should also say that hp, already higher today on upgrade and supporting the dow, it is up about 4.8%. you can see dell up. do stay with us here on cnbc. ch. take tylenol or take aleve, the #1 recommended pain reliever by orthopedic doctors.
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just two aleve can keep pain away all day. back to the news.
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all right. breaking news. if you're just joining us, dell up big on possible buyout and potentially two private equity firms are interested in buying dell. again, though, take it with a grain of salt, folks. one report, a bloomberg headline. that it. still stock up, 15%. we are joined by mr. greenburg, jack, david lutz, and the whole gang is here.
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david, i want to continue with you. we were talking before the break. who in the world -- let's just back up a second. who in world would be interested in dell and why? >> you know, it is really -- it could be the cash flow, distribution, i'm not sure. i'm not sure what kind of contract they have locked in. it could be believe that pc chain is alive and well and we hit a trough in that business. but it seems like the money lately is chasing mobile. everything is mobile. android, iphone. so it is easy to see why a lot of hot money would be put into dell. we have seen about 25 million shares trade since the headline hit on cnbc. i don't know how much is short covering but buns again i think we will have a blow off move. >> we are just here. we are joined to talk about
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dell. what are you saying about this? what are your first thought? >> yeah, you know, such good ones, such speculation, i must say. keeps coming up every now and th then. we have been hearing about dell for a while but after some time, the news kind of fades away. speculation fades away, i'm sorry. so i'm going to say that it is actually going no happen or not. >> at the same time, as you just heard, markets are not feld -- there are a lot of reasons why they -- it is hard it make out the article. >> you float the idea. >> see what market response is. >> you can see the response here. >> herb, that would be stupid because now you pay more than what you paid friday at the close. >> right. i have a premise.
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i agree, free cash flow, it can support the debt. and maybe michael dell want to reinvent the company and he doesn't want to do it under the spotlight of public -- >> hasn't he done that. he is trying all along. >> exactly, bingo. >> he can do it under the radar screen so to speak and reemerge as the new company and bring it back. >> what kind of impact is this having on the market? >> i will tell you this much. a lot of people have been try figure out, with the pc business, what are companies worth if they are broken up or sold together?
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>> the guy to get a hold with does an analysis with dell. when he added everything up, he came up with $12 which is remarkably close to where dell is trading right now. you add it up and say, what can we get for it now? his price is $12. the thing i would note about dell and differentiates, they are at number three, dell right now. i think dell is a distant third. i think o only 10% of the pc market and they are notably losing market shares. >> guys, yes, i want to, david, if you're still there, let's go through a couple of numbers. i have them up on my capitol iq screen. five years ago dell did $61 billion in sales. at the end of last quarter, down
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to 52.6 billion. revenue has fallen at dell. this is not a growth company whatsoever. i think the other thing you hit the head on before or earlier is let's talk about the debt. how microsoft and other firms arishing ewing debt for low record rates. somebody might be diving in. you could go higher. >> you were saying, watch obos. >> you mentioned low rates pch why not? wall street is out of bullets for what it is usually doing. >> could we possibly see a wave of ibos from here.
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>> they have cash flow operating under ten. >> again was this makes a difference if they are operating cash flow on dell. 3.7 billion. john fortt, here is my question. dell's revenue is lower than five years ago but operating cash flow is solid. riddle me this, what is dell? what are they selling that we seem to be well aware of. >> dell is trying to move from a pc company to more after enterprise hardware and services company. intentionally bringing down some pc numbers. trying not to compete in the low margin consumer business. michael dell las been very specific about that. for several quarters now. here is the part that doesn't make a lot of sense to me. michael dell committed to this company and committed to how it's structured.
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aside from the fact he is trying to draw down the consumer pc business. he zpt seem to have much desire because he has spent the last several years building it up into what it is now. unless there is different pressure he is facing we haven't heard about, what is the pressure to take this thing private? that, i don't understand. it is harder to do the acquisitions. again, a number of these businesses, aside from the pc business are doing okay for them at this point. >> john, i think it gets back to what we mentioned earlier in the show. that is do it under radar. on your own time. why put up with this if you are doing transportation that will take many years. >> i think being a public company offering, part of it is
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currency to do acquisitions whether in the start up realm or elsewhere. once you go private and lever up, that be difficult for a time. and you say a commodity type company like seagate do it in the path. but for dell it do that based on the direction they've been moving in, would strike me as a bit odd. >> dave, did you ever come across dave johnson at dell? here is the story. and thank you for my viewers for sending this. this is an interesting twist to the tale. dave johnson, senior vice president of dell in charge of mergers and acquisitions. he just quit friday to join the black stone group. he came from ibm three years ago, where he headed up m & a. came to dell. remember they bought quest software 2.3 billion last year. couple of other deals. you reportedly have one of the top executives, david, of dell, in charge of m & a, quitting to
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go to black stone group. >> i think if anything, that guy understands all of the sum of parts analysis that bernstein was talking about. where as i'm -- it could be too much of a coincidence. bloomberg reporter, left and went to black stone -- >> that's in the austin business journal. chris could youman, i have to give him credit for his reporting. >> you know, the key thing to understand is that are there certain as spefkt business that michael dell is very focused on. the waup street and board have been balking about that. if the company goes private, they can sit there. private equity is great. spinning out some businesses they are not concerned about. they will issue that at a very low level. that could be the strategy going forward. but there is a lot of conjecture in this name. to retail viewers, i wouldn't chase anything at this point.
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>> we are continuing to follow dell news and go to the detroit auto show. honda putting a new spin on the suv. we have a special interview with honda coming up on "street signs." ♪ [ male announcer ] how do you turn an entrepreneur's dream... ♪ into a scooter that talks to the cloud? ♪ or turn 30-million artifacts... ♪ into a high-tech masterpiece? ♪ whatever your business challenge, dell has the technology and services to help you solve it.
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all right, big news right there is dell. up 13%. coming off its high. report out that possibly two private equity firms are interested in taking the company private. but i just got an e-mail from a very well known hedge fund managers known for being big on the short side. headline, don't get too excited. he point out that with an enterprise value of just under $17 billion, it would be a huge deal to finance best buy's enterprise value by comparison is $7 billion. have you dell at about 2.3 times value of best buy. in other word, that th would be a gigantic deal. >> in the meantime, let's cross over to the auto world. honda is rolling out two new cars a the detroit auto film. phil, i believe you've got a special guest. >> i do, mandy.
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i'm joined by the highest hanking american here at honda north american. this is your baby. >> yes it is. >> the urban suv. tell us why you think a small suv is> now. >> as we go forward, a lot of pressure on the industry. fuel economy, cafe, and people's driving habits. more conscious fuel economy. we see a small growing small car segment. as p gr as /* people want the functionality that shows their personality and we believe this does that. >> is the bounce back, as far as recovering from the economy and u.s. sales. >> i think the playing field is level. we are starting the year with good inventory. same time last year we didn't have good inventory. this year it is a level play be
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field. we think we have tail wind as an industry going into the year. age of the car fleet. 11 plus years. all of those things. we think everybody is breaking great new product to market. we think that will stimulate as well. >> you are in california. you are seeing sales way above the national average in terms of increases there. does that pretend that rest of the country follows in 2013-14. >> historically we looked to the coast, california and new york, as bell weathers for the rest of the nation. if that pattern stays true, yes, we think that that result could come across the u.s. and we could get back. we see the industry returning to 16 million plus in the next couple years. >> you think we can get to 16 million million by 2016. >> on, we have breaking news and i know you 1r more on what is going on with dell.
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>> thank you. do appreciate that. yeah, let's look at dell chart. all of a sudden this is a massively interesting story. came out of nowhere. though i will say this. from 1990, 1999, the great 90s, it was legendary for wealth creation. since then, it's done nothing. >> okay. so it's good to have some kind of -- we're going to shake it off a little bit. >> either give them all their money back or find a way to make the stock value. >> absolutely. >> there you go. dell up and we're not going to comment on -- this would be one exactly to say. >> this is true. >> it is all true. we'll be back after the break. don't go away.
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okay we're going to get to street talk in a minute. but what is happening with number three pc maker, dell? we are looking at a bloomberg report that they are in talks with two private equity firms about a buyout to go private.
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there was a problem and they were at 10% but it is trading again and up by 13%. here is historical context and a fabulous chart to illustrate as well. five years ago this stock at 21 bucks. now at 12 bucks and change. ringing in the millennium hitting shop stories we may have missed. first we have fusion-io and there is an upgrade. >> yes, fusion ie is up nearly 5%. things aren't getting worse in this space. but they did say the company continues to hold what they call poll position. they think it has going to increase. fusion-io, which was a lot hotter last year. >> investors like guidance.
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and we have more from francesca today. >> guidance, 82-83. net income expected to be 50 over last year's fourth quarter. francesca stock 18.5% over one year. looks like the stock turned down today. >> job losses at amex last week. >> gold man from neutral to bye. they still have some upside in axp shares. but they said listen. history said axp needs growth. but multiple expansion. which views as unlikely for axp? >> and capitol 1. >> yeah, same call, same analyst. upgrading capital and they see $14 in upside. finally acquisition cost starting to reside.
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goldman likes capital one. >> we have best buy competitor, hh greg. >> yeah. hh greg is indianapolis based, major retailers. stock is down 7%. terrible same-store sales numbers. estimated to have dropped 10%. analyst looking for just under half that. video sales down 25%. you have appliance and cell phone up pu by, way light at hh greg. >> the irony here is best buy talks about the show rooming aspect. amazon today is at new highs. there you go. >> okay. research in motion is one we're watching. apple is moving down. it is topsy-turvey day today. >> yeah. everyone told me they have sold their aphone. there is some optimism about the blackberry 10 launch.
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there is also a lot of shorts in this name as well. they added 15,000 application fles two days during what they call the por defrance. >> well, if you're in a port-a-thon, you probably need a port-a-potty. >> with dell, shares are up 13, 14%. surging on a report they are in talks with two private equity firm. we will bring this to you from every possible angle in just a second. [ male announcer ] you are a business pro.
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we got clients in today. [ male announcer ] save on ground shipping at fedex office. coming up on "closing bell." keep an eye on dell. watch as it tried traids on the final hour. 60% of fund managers underperform the s&p an last five years. father of index funds explains why he's not surprised at all. touchy subject here on the floor of the new york stock exchange. are the days of craters on the floor numbered in ceo of continental exchange, which is
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buying the nyse, joins us exclusively. the increasingly common trend called zombie foreclosures. find out what they are and why they could be scarier no homeowners than just losing a home. maria and i look forward to seeing you at the top of the hour for what looks to be a a newsy final hour of trading. >> there is news outside of dell in technology. two big stocks, two big calls. first up, ibm. j.p. morgan chase, if you missed it, downgrading ibm. lowering their price target to 197 from 215. they say, things are getting better in technology but are worried users will be less interested in ibm given the potential as jbm sees it. they say, when things get better, maybe that bad for ibm. because investors will seek out faster growing companies. let's talk more about this and bring in morningstar's grady
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burke. grady, i'm not going to ask you to slam or praise a competitor, if you will. but what do you make of the call? >> we look at it as competitive manage at morningstar. so it is difficult to express mark market sentiment. having said that, they are at the front end of main frame refresh cycle and that tends to drive a lot of software revenue, higher margin hardware and financing revenue. and so, you know, i think that there could be a shot at ibm's shares actually doing well and potentially performing better on the market this year. >> okay, we will leave it there. i see a fair value. that is slightly above where it is now. thank you very much, grady. in the meantime, microsoft, that stock is holding up despite the research saying windows eight not helping holiday sales. that is a 3% drop in the
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holidays as people with smart phones and tablet. firm says worldwide pcs drops to 93 million un pipts microsoft, by the way, where it was a year ago. joining us is brent thill. clearly you are seeing something the mark set not seeing rye out in because have you a buy rating on the stock right now. why. >> 75% of their business is nonwindows. half of the revenue is recurring. $66 billion in cash. trades at seven times times x cash. there are a lot of other piazzas that are firing. and again, remember the office business now is almost 1.5 times the size of the client business. at higher margin. so while they have some issues with the os business, we do
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think they are firing on other businesses beyond, which again sometimes gets overlooked by the street. >> okay. we have it leave it there. thank you very much. of course this is one of my 2013 predictions that microsoft is going to continue to lose relevance. may not be inity current form. maybe broken up in a few years time from now. >> could be right. xbox, who knows, maybe find out. >> maybe getting too big. a quick dell recap to see what is happening there? okay. if you haven't been following stot rr, this is it. on report that it in talks about two private equity firms, talking about a buy yut and we will continue to follow this story coming up. ♪ [ male announcer ] don't just reject convention. drown it out.
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dell shares currently surging by nearly 14%. this pc maker is the number three one. losing to larger rivals. reports are they are in talks with two private equity firms to go private. let's get all the angles of this story. i want the private equity side of these things first up david faber. why do you think they would be interested? what are the pros and cons.
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>> the pros are you would get in a low multiple for a company that could contribute significant amounts of cash flow and a strong return that would return to a growth pattern. in doing the numbers, mandy, which i think is important for our viewers to do. i can't tell you whether the story is completely true or give you some sense into it. what i can do is look at the numbers. assume it was a $15 a share buyout. a bit above where we are right now of course with this nice run-up. that gets you to $25.5 billion total purchase price. equity checks these days running about 36% of the total. that gets you a $9 billion equity check. let's assume michael dell would roll in his shares. that leaves you with a $5 billion equity check. there is still cash. we don't know if that's trapped overseas. perhaps the analyst knows more about that. there's $11 million cash.
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but you're talking about a huge check for equity to write. it's a career bet. that's a key question. not to mention it would take at least two private equity firms. >> at least. david, at least two. >> probably closer to three. brian, they have now occasionally tried to sell to their lps directly. but the lps don't like these club deals. it would be at least two if not three. for a $5 billion equity check, take it down to $4 billion even. let's say he puts more money into the deal. i'm hard pressed to imagine the firms would be willing to step up for that kind of a number. it's just very big. not to mention $15 billion or so in financing again for a company -- again with do you want to lend to a high competitor in a tough biss. that's what people need to be thinking about with this stock up 13%. >> let's extrapolate on that and bring in jason son here. let's walk through pros and
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cons. pros of dell, good cash flow, solid balance sheet, global recognition. reasons to not by dell. these are ours. we threw them together. >> we've also got herb running in here. >> literally running. first time i've seen that. deteriorating core business, declining revenues, high value. is this going to happen? >> we couldn't chase it here. more likely not to happen than happen. they talked about this in 2010. it is a big check to write. there are reasons to be cautious as a private equity firm. you know, the things to -- the reasons to do this is it's easier to restructure a business behind closed doors than to answer to analysts every quarter. we believe this is the pc era. we think pcs are going to be around awhile. i don't think it's going to happen. it's just too big of a thing for most private equity to chase. >> herb?
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>> i just want to point something out. when you go through the numbers. i was back going through cash flow. we talk about strong cash flow at this company. this is a declining cash flow at a company. when to p.e. firms want to get involved in a company with declining cash flows and a deteriorating business model? you have those things to consider. when we talk strong cash flow, look at the numbers. free cash flow. operating cash flow minus capped backs is actually continuing to decline. >> it does make the case, though, for a pretty decent sized buyback, share buyback. >> you've got cash flow yields on the shares. probably ten times what they can finance in the debt market. so at the very least, you know, i could see a mass i have buyback of shares to take up the slack. it does underpin the differential and value between the bond market now. >> you've got an $11 price tag
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on dell. is there anything with regards to the report today that would make you change those ratings? >> no. not with this report today. we downgraded the stock about a year ago. you know, we do see some upside in the back half of this year as xp end of life in may of 2012. about a third of the commercial still on xp. >> jayson, sorry to jump in here, but the show's about a end. thank you all for jumping in. we'll continue to follow the story here. >> "closing bell" will have more on this. herb, great job running. get your exercise in for the month. "closing bell" starts right now. ♪
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