Dell Earnings Drop 79%

As expected, Dell released disappointing financial results for the first quarter. Profits fell by 79 percent due to sluggish PC sales. Ironically, those poor results could actually be good for founder Michael Dell, who wants to convince investors and the company board to accept his bid to take the company private.

Computerworld’s James Niccolai reported, “Dell reported another quarter of declining profits and revenue Thursday as CEO Michael Dell continues his fight to take the company private. Dell’s profit for the quarter, ended May 3, was $130 million, down 79 percent from $635 million a year earlier. Revenue declined 2 percent to $14.07 billion.”

All Things D’s Arik Hesseldahl added, “The fall was led by end-user-computing, Dell’s mainstream PC business. Sales there fell 9 percent, and the unit’s operating margin fell 65 percent. That’s where the pain point is. Enterprise sales grew by about 10 percent to $3.1 billion. Services revenue grew to about 2 percent. Software sales were $295 million but that unit ran at an operating loss.”

The Associated Press observed, “If there’s ever an opportune time for a company to flounder, it’s right now for Dell Inc. That’s because Dell’s board of directors is trying to persuade shareholders to accept a $24.4 billion buyout offer from CEO Michael Dell and other investors. Some shareholders say the offer price of $13.65 per share is too low, but Dell’s board contends it’s a good deal in light of challenges facing the company.”

Poornima Gupta and Edwin Chan with Reuters noted, “The disappointing results lend weight to Michael Dell’s effort. The man who started Dell from a college dorm room wants to take the world’s No.3 PC maker private for $24.4 billion, arguing that its transformation into a provider of enterprise computing services, from mainly a computer maker in a shrinking market, is best done away from public scrutiny.”