Dell, the world's third largest personal computer manufacturer, is in talks with two private equity firms about a potential buyout.
A buyout of the US$19 billion ($22.6 billion) company would be one of the largest deals since the global recession.
A source familiar with the matter confirmed the talks to Reuters, after a Bloomberg report that sent Dell's shares soaring 13 per cent to near an eight-month high. The discussions were preliminary and financing has not been secured, said Bloomberg, citing two people with knowledge of the matter.
Dell, which has steadily ceded market share to Hewlett Packard and China's Lenovo, declined to comment on what it called rumours and speculation.
Dell once topped the PC market after pioneering the strategy of selling all its computers direct online and by phone, but now has a mixed distribution model, as do most of its major rivals.
Dell New Zealand reported a profit of $625,000 on revenue of $12.3m in the year to January 2012, but that is a small fraction of the value of Dell computers sold in New Zealand. Most consumers buy Dell PCs from the company's website, after which they are manufactured and shipped to customers from its factory in Malaysia.
Some analysts say taking the company private - an idea that has surfaced sporadically in past years - makes sense.
Dell has lost 40 per cent of its value since last year's peak, and it 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.
Others pointed to the sheer expense of such a deal, an outsized debt burden of some US$4.5b 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 US$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."
Shipments of computers by the company, now reinventing itself as a provider of computers and services to corporations and government agencies, plummeted 21 per cent in the fourth quarter, according to IDC. In the third quarter, its profit slid 47 per cent.
Overall sales of PCs over the holidays slid for the first time in more than five years, according to industry researcher IDC.
Another industry analyst, Gartner, reported the launch of Microsoft's latest Windows 8 operating system in October had failed to fire up the PC market, with worldwide PC sales falling 4.3 per cent in the final three months of 2012 compared with the same period in 2011.
The analyst firm said consumers were tending to hang on to older PCs for longer and sharing them within a family to do administrative jobs, while splashing out on "more exciting" touch-sensitive tablets and smartphones for their individual use.
Microsoft said last week that it had sold 60 million Windows 8 licenses, including upgrades. It said that put the operating system on a similar sales trajectory to that of Windows 7 following its launch in 2009.
On Monday, Gartner estimated that Dell lost 2 percentage points of market share in the fourth quarter, slipping to 10.2 per cent from 12.2 per cent a year earlier.
Dell's fortunes have waxed and waned. In 2007, billionaire chief executive Michael Dell returned to the company he founded to revive its business.
Michael Dell revealed at a Sanford Bernstein investors' conference in 2010 that he had once considered taking private the company. Dell told investors a transformation of his company that he had hoped to effect upon his return was "incomplete".
Those comments triggered a round of speculation, but most analysts said buying out such a large company would be difficult because of the massive financing requirements.
Michael Dell now owns more than 14 per cent of the company, according to Thomson Reuters data, and last year was ranked the 22nd richest American with a fortune of US$14.6b.
- Tom Pullar-Strecker of BusinessDay and Reuters