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Imagine You Are Michael Dell

Tuesday, 15 Jan 2013 | 9:51 AM ET
Michael Dell
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Michael Dell

Dell. I can imagine how Michael Dell must be feeling these days: He thinks the sentiment that the PC business is dying is too pessimistic, and believes that the company is slowly making a transition to the more profitable enterprise space. He also believes no one will give him the time to make the transition.

I share his pain. I share his pain. The thinking behind going private is pretty simple: It will be less painful, and less embarrassing, to sell off pieces of the company while it is private.

But the mere fact that the stock price is down and financing is cheap is not a sufficient reason to take the company private.

(Read More: Dell Buyout Has '50-50' Chance: Wilbur Ross)

Going private would require Dell to devote a large part of its roughly $3 billion a year free cash flow to paying interest payments. While there might be some way to make that possible, that is money that could go to acquisitions to move deeper into the enterprise space.

Dell's earnings power is not stable. Indeed, it's not very predictable at all right now. We know that the PC industry is declining, so how is a buyer going to model future cash flow? How is it going to determine an exit strategy?

And who is going to come up with $20 billion to $25 billion to buy it?

And what about Michael Dell? He's currently the majority shareholder at about 16 percent (or about $3.5 billion at the current price. Any investor would almost certainly demand a higher stake. Will Michael Dell allow himself to become a minority shareholder?

Here's another issue: Dell has large amounts of its $14.2 billion in cash tied up offshore ... it would likely have to repatriate that money and pay a LOT of taxes.

Elsewhere:

1) Master limited partnerships (MLPs) are hot ... but not that hot. USA Compression Partners went public last night at $18, below the price talk of $19 to $21 share. But the size of the offering was increased, from 10 million shares to 11 million. Sounds like it priced the deal to work: It still raised the roughly $200 million it was looking to raise. USA Compression provides natural gas compression services. Its shares opened at $17.50 at the New York Stock Exchange.

MLPS ARE HOT... they're backed by physical assets that generate revenue under long-term contracts. The main attraction: They pay out a juicy yield to investors. USA Compression pays out a 9.4 percent yield.

Two other MLPs should price this week: SunCoke Energy Partners (SXCP), which owns cokemaking facilities to aid in steel production (8.25 percent yield) and CVR Refining (CVRR) which owns petroleum refining operations in Kansas and Oklahoma (18.8 percent yield!).

Of 44 initial public offerings that have priced since September, seven have been MLPs, according to IPOFinancial.com.

2) Lennar reported profit of $0.56 a share, $0.12 above estimate. New orders up 32 percent. CEO Stuart Miller sounded the most optimistic notes yet on the housing recovery: "During our fourth quarter, the housing industry took further steps toward a sustained recovery. Low mortgage rates, affordable home prices, reduced foreclosures, and an extremely favorable 'rent vs. own' comparison continue to drive the recovery. Housing should continue to assume its traditional role in the broader economic recovery, driving employment upward, increasing consumer confidence, and helping new homeowners accumulate wealth through home ownership, thus helping to accelerate economic growth."

Miller said he was "expecting another year of strong profitability." The problem is with investor expectations: The stock is at a five-year high ... and 32 percent gains in orders will be much tougher for 2013.

3) Facebook. No idea what it might announce at its meeting today, but a phone seems very unlikely. More probable is a new search technology ... not a rival to Google as it would not access the web itself, but an engine that would allow it easier to search on Facebook itself.

(Read More: Facebook Mystery Announcement—What to Expect)

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  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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