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Dell gains after Goldman says leveraged buyout possible

Dell Inc. advanced after Goldman Sachs Group Inc. upgraded the stock to "buy" and said the company’s net cash balance could present an opportunity for a leveraged buyout.

The shares rose 4.4 percent to $10.06 at the close Monday, the highest price since Sept. 24. The shares have declined 31 percent this year, while the Standard & Poor’s 500 Index has risen 12 percent.

Dell (Nasdaq: DELL), the No. 3 personal computer maker, is struggling as companies wait to upgrade machines and consumers turn to smartphones and tablets like Apple Inc.’s (Nasdaq: AAPL) iPad and iPhone. While demand for PCs has declined, Dell’s net cash balance of $5.15 billion provides “some downside buffer as it produces opportunity for an LBO or levered recap under the right conditions,” said Bill Shope, an analyst at Goldman.

“Dell has become an attractive deep value play, and we would be buyers of the stock,” Shope said in a research report. He raised his price target on Round Rock, Texas-based Dell to $13 from $9, and had previously recommended selling the shares.

David Frink, a spokesman for Dell, declined to comment on the Goldman research.

“Our focus is on long-term strategy,” Frink said.

Dell on Nov. 15 forecast a fourth-straight quarter of declining sales, indicating fiscal fourth-quarter revenue will be $14 billion to $14.4 billion. That was less than the $14.5 billion average estimate of analysts.

PC shipments tumbled 8.3 percent in the calendar third quarter from a year earlier, according to market researcher Gartner Inc., and are projected to decline this year for the first time since 2001, according to IHS iSuppli.

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