Dell (NASDAQ: DELL) is not going to be able to buy its way out of trouble. The company and Michael Dell recently settled government charges which have damaged the founder’s credibility as a public company CEO.
Dell currently faces charges that it shipped millions of PCs to customers that some of its employees knew were defective.
Dell bought digital storage company 3Par (NYSE: PAR) today for an 86% premium to its share price as of Friday. That price was $9.56 and Dell’s purchase price is $18–in cash. It may be that the 3Par board would not take stock given Dell’s shaky prospects. The total price of the deal is $1.15 billion. What is particularly extraordinary is the 3Par has not traded above $13.67 this year. Nor has it ever been above that price since it went public. 3Par revenue for the June quarter was only $54.3 million, up 22%. 3Par actually lost $1.8 million for the quarter, the same as in the period a year ago.
Dell should have been able to make the buy-out at below $14.
Douglas A. McIntyre
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