Dell Technologies Inc. (NYSE:DELL) announced on Monday that it has entered into an agreement to issue $1.5 billion in senior unsecured notes. The transaction involves $700 million of 4.350% notes due in 2030 and $800 million of 4.850% notes due in 2035. The notes, guaranteed by Dell and certain subsidiaries, will be offered at slightly below par value, with the 2030 notes at 99.883% and the 2035 notes at 99.646%.
The offering is scheduled to close on October 8, 2024, subject to customary conditions. Dell plans to use the proceeds to redeem its 5.850% senior notes due in 2025 and for general corporate purposes, potentially including debt repayment.
This financial maneuver is part of Dell's broader strategy to manage its debt profile and obligations effectively. The sale has been registered with the Securities and Exchange Commission, and details are included in the Registration Statement on Form S-3, along with a preliminary prospectus supplement and a final prospectus supplement, both dated October 1, 2024.
Barclays Capital Inc., Citigroup Global Markets Inc., Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC, SG Americas Securities, LLC, and Wells Fargo Securities, LLC are serving as representatives for the underwriters in this transaction.
In other recent news, Dell Technologies has reported a series of significant developments. The company has seen robust growth in its core businesses, with the Client Solutions Group and Infrastructure Solutions Group growing by 12% and 38% respectively. Dell has also expanded its presence in the artificial intelligence (AI) market, boasting a $3.8 billion backlog.
In a significant policy change, Dell has mandated a full office work week for its global sales team, aiming to enhance collaboration and skill development. The company also launched Dell AI for Telecom, an initiative designed to assist communications service providers in deploying AI technologies more efficiently.
Dell has recently rejoined the S&P 500 Index, marking a milestone in its history and reflecting its commitment to the AI market. The company has also issued 26.5 million Class C common shares to its founder and CEO, Michael Dell, as part of its strategy to deliver enhanced value in the AI market.
Analysts have provided varying outlooks on Dell's prospects. Mizuho initiated coverage with an Outperform rating, citing the company's diverse portfolio and robust free cash flow. Conversely, Susquehanna issued a Neutral rating, expressing concerns about the uncertain economic returns of AI hardware and Dell's strategy for scaling its AI services.
Evercore ISI maintained a positive outlook, reiterating an Outperform rating despite expected gross margin headwinds from a greater mix of AI servers and inflationary component costs.
InvestingPro Insights
Dell Technologies Inc.'s recent move to issue $1.5 billion in senior unsecured notes aligns with its financial strategy, as reflected in recent InvestingPro data. The company's market capitalization stands at $79.7 billion, indicating its significant presence in the Technology Hardware, Storage & Peripherals industry. Dell's revenue for the last twelve months reached $91.84 billion, showcasing its robust financial position despite a slight revenue decline of 1.9% over the same period.
InvestingPro Tips highlight Dell's aggressive share buyback program and high shareholder yield, suggesting a commitment to returning value to shareholders. This is further evidenced by the company's dividend growth of 20.27% over the last twelve months, with a current dividend yield of 1.57%. These factors may contribute to investor confidence as Dell manages its debt profile through this new note issuance.
The company's P/E ratio of 20.46 and adjusted forward P/E of 17.69 indicate that the stock is trading at reasonable valuations relative to earnings. An InvestingPro Tip notes that Dell is trading at a low P/E ratio relative to near-term earnings growth, which could be attractive to value-oriented investors.
For readers interested in a more comprehensive analysis, InvestingPro offers 12 additional tips on Dell Technologies, providing deeper insights into the company's financial health and market position.
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