News Column

Dell's Profit in Eye of Beholder

Feb 20, 2013

Scott Martin

Dell on Tuesday reported a 31% drop in profit in a report that still might amplify the saber rattling of investors objecting to the PC maker's buyout plan.

Dell reported fiscal fourth-quarter net income of $530 million on revenue that was down 11%, at $14.3 billion, from a year ago. But excluding special items, such as acquisition costs, it made $702 million, more than Wall Street was expecting on that same basis.

The Street expected net income of $676.2 million on revenue of $14.1 billion. Those estimates usually exclude special items. And excluding special items, Dell reported earnings of 40 cents per share, compared with the 39 cents forecast by a survey of estimates from Thomson Reuters.

Dell's financial outlook is on an unusual center stage. Investors are focused on the company's $24.4 billion buyout plans. A positive earnings report was expected to add more fuel to the fire for investors seeking a raise in the offer price.

"A lot of this depends on how the market will interpret the quarter and determine if there's material upside to the deal," IDC analyst Crawford Del Prete says.

Dell said it will not be giving guidance on the company's outlook because of the pending transaction.

Michael Dell's bid to take his PC brand private is the latest admission of failure from an industry rocked by consumers flocking to touch-based computing. Dell's desktop PC business was down 14% year-over-year. Going private would let Dell refocus without shareholder scrutiny, allowing it to slash its PC exposure and attempt higher-margin businesses.

PC sales worldwide fell 6.7% in the fourth quarter from a year earlier, according to preliminary results from Gartner. Tablet sales worldwide grew 75% in the same period, according to early results from researcher IDC.

Dell struck a deal this month with private-equity firm Silver Lake Partners, Microsoft and a consortium to take the company private. The Dell founder has pledged to put in his 14% stake plus cash.

The deal has drawn heated opposition from shareholder Southeastern Asset Management, which holds roughly 8.5% of Dell's outstanding shares and has filed regulatory documents in opposition of the deal, along with mutual fund T. Rowe Price.

The offer would give Dell stockholders $13.65 in cash for each share, representing a 25% premium over the stock price before rumors surfaced. Southeastern Asset Management says Dell's value should be set closer to $24 per share.




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Source: (c) Copyright 2013 USA TODAY, a division of Gannett Co. Inc.


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