Dell Profit Drops, But Beats Expectations

The big question is how the PC maker's latest financial report will affect the bid to take the company private.
Posted February 20, 2013

Cynthia Harvey

Dell has released what could be its last quarterly financial report as a public company. The company's sales and profits both continued their decline, but they weren't as bad as Wall Street analysts had expected. The better-than-expected news may cause investors to hold out for more money in the company's privatization offer.

MarketWatch's Benjamin Pimentel and Dan Gallagher reported, "Dell Inc. on Tuesday posted results that beat Wall Street’s expectations, even as the Texas company posted a notable drop in profit and sales in its fiscal fourth quarter. The results, however, were expected to be overshadowed by questions about Dell’s (US:DELL) plan to go private in a $24.4 billion deal, particularly given the push by some shareholders for a higher buyout price."

PCWorld's James Niccolai noted, "It was the fifth consecutive quarter in which Dell's profits shrank, and the fourth in which it reported declining revenue. The company has been hit by a downturn in the PC market. Revenue for its fourth fiscal quarter, ended Feb. 1, declined 11 percent to $14.3 billion, Dell said. Net income was $530 million, down 31 percent from a year earlier, while earnings were $0.30 a share, down 30 percent. Revenue from desktop and laptop PCs, which account for about half Dell's business, declined 20 percent in the quarter. Sales from storage and services also fell from the year earlier. The only business unit to see growth was Dell's server and networking business, where sales were up 18 percent, Dell said."

USA Today's Scott Martin added, "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 to hike the offer price."

Eric Savitz with Forbes commented, "In this situation, Michael Dell might actually have been better off if the company had reported a miserable quarter, rather than one that slightly topped estimates. Which is not to say that it was a spectacular quarter, either."

Tags: services, software, earnings, Dell, PC sales, sales, quarterly financials

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