Dell profit dives 79 per cent on falling PC sales

Dell reported another weak quarter as its founder fights to make it a private company

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 $IUS130 million, down 79 per cent from $US635 million in the same quarter a year earlier. Revenue declined 2 per cent to $US14.07 billion.

Dell's PC division was particularly hard hit. Sales for the quarter were down 9 per cent to $US8.9 billion, Dell said, and the group's operating profit skidded 65 per cent lower to $US224 million. Laptop sales were hit especially hard.

Its enterprise business showed mixed performance. Sales of servers and network gear were up 14 percent but storage was down 10 per cent. Dell's services division reported a 2 per cent increase in revenue.

Dell is trying hard to build an enterprise software business, which it hopes will eventually generate higher profits than its PC division. The software group reported an operating loss for the quarter, however, as Dell invested in new sales and R&D staff.

Dell's earnings for the quarter on a pro forma basis, which excludes one-time items, were $US0.21 a share, well off the analyst forecast of $US0.35 a share, according to Thomson Reuters.

In a statement, CFO Brian Gladden said Dell's profits were affected by steps it took to improve its competitiveness. "We'll also continue to make important investments to support our strategy and drive long-term profitability," he said.

Michael Dell announced in February that he planned to take the company private in a deal with Silver Lake Partners valued at $US24.4 billion. The company founder has said he wants some breathing room to focus on long term investments without the constant scrutiny from Wall Street.

The plan has run into serious opposition from big shareholders, who think the company is worth more than Michael Dell and his partners have offered to pay.

Shareholders may end up being asked to vote on the matter this summer. If a majority of shares are voted in favor of Michael Dell's plan to take the company private, Dell's biggest outside investor, Southeastern Asset Management, has indicated it might go to court to fight for a higher price.

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James Niccolai

IDG News Service
Topics: business issues, Dell, hardware systems, financial results, Mergers and acquisitions
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