Dell’s earnings plunged 79 percent in the latest quarter as the shift to smartphones and tablets reduced demand for the company’s personal computers.
The dismal performance announced on Thursday actually might work to the advantage of Dell Inc’s board. That is because Dell’s directors are trying to persuade shareholders to accept a US$24.4 billion buyout offer from CEO Michael Dell and other investors.
Some shareholders say the sales price of US$13.65 per share is too low, but Dell’s board contends it is a good deal in light of challenges facing the company.
The results for the fiscal first quarter, which ended on May 3, should reinforce the board’s point. At the same time, opponents of that proposal may question whether the company is deliberately finding ways to make the results look as bleak as possible in an effort to get the deal done.
A shareholder vote is supposed be held by Aug. 2. Two of Dell’s largest shareholders, billionaire Carl Icahn and Southeastern Asset Management, are trying to block the sale to Michael Dell with an alternative proposal that would keep the company public traded. If Michael Dell’s offer is accepted, it would end Dell’s 25-year history as a publicly traded company.
Dell earned US$130 million, or US$0.07 per share, in the latest quarter, compared with US$635 million, or US$0.36 per share, a year earlier.
If not for certain items unrelated to its ongoing business, Dell said it would have earned US$0.21 per share. That figure was below the average estimate of US$0.35 per share among analysts polled by FactSet.
Dell’s revenue for the period dipped 2 percent to US$14.1 billion, about US$600 million above analyst predictions.
The company benefited from an improvement in business software and other technology services, an area that Michael Dell wants to expand.
Revenue in that business rose 12 percent from last year.