Dell of a prospect - FT.com For sale: four-door sedan, recent model, low miles. Note: owner's mother lives in back seat and refuses to leave. All reasonable offers accepted. Such is Dell's dilemma as it flogs itself to private equity buyers and, indeed, to potential shareholders of any kind. The company has built a solid and serviceable, if unexciting, information technology business selling servers, storage, services and software. But it comes along with Dell's personal computer business, which is in a bad tailspin that could just as easily be permanent as cyclical. So the trick that investors must turn is to figure out what the IT business is worth, and therefore how much they would be paying for the PC business, and whether the latter amount makes sense for an asset that could be in decline. The problem is that Dell does not break out profitability by product line the way that, for example, Hewlett-Packard does. So outsiders are left to estimate and speculate. In the most recent quarter, HP's operating margin in PCs was 3.5 per cent (two percentage points lower than the year before). Assume Dell's margin was the same. It sold $6.6bn in PCs in the quarter. That suggests $230m in operating earnings and, perhaps, $1.4bn in earnings before interest, taxes, depreciation and amortisation on an annualised basis. The IT business, by implication, produces about $3.2bn in annualised ebitda. There is good reason to think that Dell's PC profitability is lower than HP's, but these numbers are likely to be close enough. Dell's market value is $22bn (depending on how much value one puts on Dell's foreign-held cash, that number could be a few billion lower, effectively). Even putting a reasonably high rating on the IT business, investors are paying several billion dollars for the PC business. Anyone buying this car must be thinking the back seat passenger has significant value, too.