Dell is in talks with private equity firms on a potential buyout, two sources familiar with the matter told Reuters, confirming reports that sent shares in the world's No. 3 PC maker soaring 13 percent to nearly a eight-month high.
The firms are now holding discussions on a deal with billionaire Chief Executive and founder Michael Dell, who owns about 14 percent of the company, according to one source with knowledge of the matter.
The Wall Street Journal cited unidentified sources as saying TPG and Silver Lake could team up on an offer, possibly in conjunction with other investors such as pension funds. JPMorgan Chase was also involved in the negotiations, it added.
The first source told Reuters any potential deal could be structured as a management-led buyout with Michael Dell at the helm.
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Talks had progressed for two to three months, heating up in late 2012, and a deal could be reached in six weeks, the Journal cited sources as saying.
Dell, which has steadily ceded market share to Hewlett-Packard and China's Lenovo, declined to comment on what it called rumors and speculation.
The company has lost 40 percent of its value since last year's peak, and is trying to reinvent itself as a seller of higher-margin services to corporations - an internal overhaul that might be conducted away from public scrutiny.
Some analysts say taking the company private, an idea that has surfaced sporadically in past years, makes sense.
But others pointed to the sheer expense of such a deal, an outsized debt burden of some $4.5 billion and murky prospects as a major player in a PC market that's dwindling with the advent of tablets such as Apple's iPad.
"The market value of Dell has come down so much that a buyout has become something that is plausible. They have about $5 billion in net cash and also free cash flow generation that could sustain payments on debt from a leveraged buyout," said S&P Capital IQ analyst Angelo Zino.
"However, we think it's unlikely, given the sheer size of Dell and where the stock is currently trading at."
A buyout of the $19 billion company would be one of the largest deals since the global recession.
Bloomberg first reported that Dell and private equity firms were discussing a deal.
Before news of the deal emerged, Sanford Bernstein analyst Toni Sacconaghi speculated that Dell was worth $12 a share on a sum-of-parts basis, of which the PC business was worth about $4.70. In a report last week, the analyst said Dell could conceivably be split along its PC and enterprises segments, though such an approach would significantly reduce much-needed scale.