Dell's Salvation May Be Upon Us

NEW YORK (TheStreet) -- Buyout speculation is once again swirling around the beleaguered Dell(DELL) , a move that could finally unlock the company's value after its shares fell by a third last year.

The No. 3 PC maker, once the world's largest, is in buyout talks with private equity firms, according to Bloomberg, which cited two people with knowledge of the matter. One unidentified source said Dell is in discussions with at least two firms. The sources, however, say the talks are preliminary and could collapse if the private equity firms are unable to gain financing or work out a future exit strategy.

Dell hasn't yet responded to TheStreet's request for comment, although at least one analyst says it would be a shrewd move for the Texas tech giant.

ISI Group analyst Brian Marshall notes that Dell is currently in the throes of a long-term transition from selling commodity PCs and servers to enterprise services, such as storage, networking, security and software.

"In our view, it can be difficult to realize the full value of various corporate assets (e.g., sum-of-parts) during transition periods and executing on a long-term transformation as a private company could have advantages," he wrote in a note released Monday. "Going private makes sense given Dell's low valuation, solid free cash flow, Michael Dell's large ownership stake and a multi-year business transformation."

Michael Dell owns just over 15% of the company's shares, according to Securities and Exchange Commission Filings as of May last year.

Investors welcomed the rumor. Dell shares, which have lost more than 22% over the past 12 months, closed up 13% to $12.29 on Monday.

Sterne Agee analyst Shaw Wu says a Dell private equity buyout is possible, but rates the likelihood of it happening as low.

"It would take sizable financing for a company of Dell's size with its $21 billion market cap," he wrote in a note on Monday. "In addition, a deal of this size would likely involve multiple private equity firms and we estimate that the majority of its businesses (70%) remain under structural and secular pressure."