????The company needs to transform, but here's why going private doesn't make sense.

????Rumors of Dell going private really took off back in June when, at the Sanford C. Bernstein investor conference, CEO and founder Michael Dell, well, mentioned that he had considered that strategy.

????Then earlier this month, CFO Brian Gladden poured some gas on the flames when he said the debate was still alive in Austin, saying that Dell (DELL) had spent "a whole lot of time thinking about this," but "it's not something we think is going to happen anytime soon." To listen to the message from Dell's C-Suite is to hear that privatizing is discussed and seriously considered. (But a few weeks after the talk, a spokesperson tried to temper the discussion, saying: "There is no ongoing plan, or exploration of taking the company private.")

????While the move would seem to make a whole lot of sense -- at the very least, it would eliminate the pack of pesky journalists trying to decode the truth-- it doesn't make much sense from an investor's point of view. Going private may be a nice dream, but for Dell, it's not a dream worth making coming true.

Why?

????Well, for one, it's unrealistic. Dell has such a large market cap—about $26 billion—that taking the company private would probably require several private equity firms teaming up. That would be a tricky process, says Abhey Lamba, an IT hardware analyst in the Technology Research team at investor firm International Strategy & Investment. He says that kind of multiple-firm agreement is unlikely. Privatizing Dell would place it among the biggest private equity deals in history, across all industries, not just tech.

????But even if a coalition of private equity powerhouses and Michael Dell himself could pool the money, why would they? Dell's problems aren't ones that can be solved by cost-cutting or centralizing back office issues -- two favorite tactics of buy-and-flip PE firms. Dell needs to undergo a transformation -- likely, an expensive transformation -- from selling PCs and gear, to becoming an enterprise and consulting powerhouse. IBM (IBM) and HP (HPQ) have shown how it can be done right.

????For years, Dell was focused on increasing margins on hardware sales through its revolutionary "just in time" model for low-inventory, high-volume computer sales. But as this chart shows, the margins in the PC hardware business have eroded beyond Dell's ability to extract efficiencies and profitability -- that business for Dell has been in a near-steady decline.

????(Chart from Wikinvest)

????"In the past, when you asked [Dell] about innovation, they would talk about supply chain," says Jayson Noland, an IT systems and networking senior research analyst at Baird. But other tech companies such as HP and Acer started using a model of outsourcing PC development to Asian companies such as Foxconn and Flextronics.

????Dell, once the company everyone wanted to be, has become a low margin assembler (see chart below). Going private might help it juice margins slightly, but not enough to come close to any of the new market leaders.

????(Chart from Wikinvest)

????Going private also presents an issue if Dell is going to pivot its focus to return to enterprise customers -- one customer group that still values the Dell ability to quickly build, ship and support PCs. To get up to speed on enterprise quickly, Dell will have to purchase other companies who are ahead in the game. The best tool Dell has to buy and retain enterprise experts is, analysts believe, its stock.