Dell Inc, the computer maker planning to go private in a US$24.4 billion deal, reported fiscal fourth-quarter sales and profit that topped analysts’ estimates, reflecting businesses’ demand for servers and software even as PC sales slump.
Revenue fell 11 percent to US$14.3 billion in the period that ended in January, exceeding the US$14.1 billion average estimate of analysts, according to data compiled by Bloomberg.
Earnings excluding certain items declined to US$0.40 a share, compared with analysts’ estimates of US$0.39.
The results suggest CEO Michael Dell has made headway in his campaign to transform the company into a provider of a broad range of business technology products. Dell’s earlier struggle to gain share in mobile devices and a late entry into cloud computing contributed to a 31 percent decline in its stock last year, prompting Dell to seek a buyout.
“The strength in the enterprise business indicates their focus on that business is working as they had thought,” said Abhey Lamba, an analyst at Mizuho Securities USA Inc, who has a neutral rating on Dell. “Their focus is on the high-margin businesses, which is showing up in the results.”
Michael Dell and Silver Lake Management LLC offered US$13.65 a share to take Dell private in the largest leveraged buyout since the financial crisis. Some stockholders want a higher price, and the results could strengthen their hand, Lamba said.
The company did not discuss the proposed transaction on a conference call on Tuesday, and Dell did not address analysts as he usually does. Investors are more focused on the deal than quarterly results, said Shaw Wu, an analyst at Sterne Agee & Leach Inc.
“That seems to be more important than the quarter itself in determining the near-term stock direction,” said Wu, who has a neutral rating on Round Rock, Texas-based Dell. “The results won’t matter as much.”
Fiscal fourth-quarter net income declined 31 percent to US$530 million, compared with analysts’ estimate of US$551 million. Dell benefited from about US$250 million in legal settlements during the quarter.
Robust demand for Dell’s networking gear and servers offset weakness in other divisions. Server and networking sales rose 18 percent to US$2.62 billion last quarter. That partly offset a 14 percent fall in desktop PCs and a 25 percent slide in the firm’s mobility division, which included laptops.
Lamba had expected server and networking sales growth percentage to be in the “low teens,” and said Dell was gaining share from IBM. It is also wooing companies that are buying many servers to run large Web sites.
In data-center products and services — where Dell has acquired 18 companies for US$12.7 billion since 2009 — it also faces competition from Cisco Systems Inc and Oracle Corp.
Dell’s sales for fiscal 2014, which began this month, may fall 1.3 percent to US$56 billion, based on analysts’ estimates. Earnings excluding some items may fall 2 percent to US$1.68, according to data compiled by Bloomberg.