Dell profits plunge on PC woes
17 May 2013, 09:25
New York - US computer giant Dell said Thursday its quarterly profit plunged 79 percent from a year ago, as a shift away from PCs hammered the company's bottom line.
The net profit for the first fiscal quarter slumped to $130 million, as the Texas-based group was studying a plan to go private to restructure in the face of a shifting technology landscape.
Earnings per share adjusted for special items amounted to 21 cents a share, far below the average Wall Street estimate of 35 cents a share.
Revenues dipped two percent from a year ago to $14.07 billion, beating most analyst forecasts.
The results come with Dell and dissident shareholders locked in a battle over the company's value following a bid by founder Michael Dell to take the company private.
Michael Dell, who is heading the $24.4 billion offer for the company, has argued that a radical change is needed to get the company on track in a market shifting away from PCs to mobile devices.
But dissident investors led by corporate raider Carl Icahn have argued that the bid undervalues Dell and that the private equity deal would be a "giveaway."
Icahn has proposed an alternative plan based on a so-called leveraged recapitalization.
Icahn and the other dissident shareholders, who hold nearly 13 percent of Dell shares, are urging shareholders to reject the private equity buyout and opt instead for its "superior" recapitalization plan, keeping the company public.
In the quarterly results, Dell said revenues from its end user computing segment fell nine percent and operating profits tumbled 16 percent.
The news was somewhat better in other areas where Dell has sought to diversify, such as servers and software.
"We made progress in building our enterprise solutions capabilities in the first quarter and are confident in our strategy to be the leading provider of end-to-end scalable solutions," said chief financial officer Brian Gladden.
"In addition, we have taken actions to improve our competitive position in key areas of the business, especially in end-user computing, and it has affected profitability. We'll also continue to make important investments to support our strategy and drive long-term profitability."
Dell offered no outlook for the second quarter and executives said they would not comment on the buyout plan. It has created a special committee of the board to study the private equity deal and alternative bids.
Dell unveiled plans to go private in February, giving founder Michael Dell a chance to reshape the former number one PC maker away from the spotlight of Wall Street.
The move, which would delist the company from stock markets, could ease some pressure on Dell, which is cash-rich but has seen profits slump, as it tries to reduce dependence on the slumping market for personal computers.
Under the terms of the deal, Michael Dell, who currently owns some 14 percent of Dell's common shares, would remain chairman and chief executive and boost his stake in the company.
Additional cash for the deal will come from Silver Lake, a major tech investment group, and MSD Capital, a fund created to manage Michael Dell's investments. The plan also calls for a $2 billion loan from Microsoft.