Dell profit falls amid attempt to go private

SAN FRANCISCO Tue Feb 19, 2013 5:13pm EST

A man wipes the logo of the Dell IT firm at the CeBIT exhibition centre in Hannover February 28, 2010. REUTERS/Thomas Peter

A man wipes the logo of the Dell IT firm at the CeBIT exhibition centre in Hannover February 28, 2010.

Credit: Reuters/Thomas Peter

SAN FRANCISCO (Reuters) - Dell Inc on Tuesday reported a 31 percent drop in profit, hurt by a shrinking consumer business, as investors weighed founder Michael Dell's offer to buy out the world's No.3 maker of personal computers.

Michael Dell, teaming up with private equity firm Silver Lake and software maker Microsoft, is offering $13.65 a share to buy out the company, but at least four of its largest investors are opposed to the $24.4 billion deal.

Dell posted net income of $530 million, or 30 cents a share, in its fiscal fourth quarter on revenue of $14.3 billion. That came in slightly higher than the average analyst estimate of revenue of $14.12 billion, according to Thomson Reuters I/B/E/S.

Excluding certain items, it earned 40 cents a share, compared to an average forecast for 39 cents.

While the results matched expectations despite the tough business environment, "there isn't anything really to be super excited about," Brian Marshall, analyst with ISI Group, said, adding that declining revenue and profit doesn't bode well for the company.

"The (buyout) deal makes sense. It will go through," he said. "They will probably have to pay a little more than $13.65 to get it done but at the end of the day there aren't a lot of options out there."

Shareholders representing almost 14 percent of Dell shares not held by Michael Dell have now said they will vote against the deal. Billionaire Dell, who created the computer maker out of his college dorm room in 1984, holds a roughly 16 percent stake and needs a majority of shareholders - excluding him - to vote for the deal.

Dell gave no financial forecast for fiscal 2014 or the fiscal first quarter, citing the proposed merger agreement.

The company reiterated that it plans to file a proxy statement with the U.S. securities regulators on the merger agreement but made no other reference to the buyout in its earnings release.

Shares of the company edged 0.5 percent higher in after-hours trade to $13.87, from a close of $13.805 on the Nasdaq.

SLIDING PC SALES

Michael Dell, who typically participates in calls with analysts and investors following the release of results, will not take part on Tuesday, given his participation in the buyout.

Dell has lost 40 percent of its value since last year's peak and is trying to reinvent itself as a seller of higher-margin services to corporations - an internal overhaul that some analysts say may be better conducted away from public scrutiny.

The company, once the world's top PC maker and a pioneer in computer supply chain management, is struggling to defend its market share against hard-charging Asian rivals like Lenovo.

Dell was also hurt by the slide in holiday-season sales of personal computers for the first time in more than five years despite the launch of Microsoft Corp's new Windows 8 operating system.

Dell's worldwide PC shipments fell nearly 21 percent to 9.48 million in the last three months of 2012 from 11.97 million in the same period a year ago, according to IDC.

The bright spot for Dell was its growing enterprise solutions revenue, which rose 6 percent to $5.2 billion, and accounted for 34 percent of revenue for fiscal year.

In contrast, consumer revenue plummeted 24 percent to $2.8 billion, underscoring the plight of the broader PC market while sales to large corporations declined 7 percent to $4.7 billion in the quarter.

Dell ended fiscal 2013 with $15.3 billion in cash and investments.

(Reporting by Poornima Gupta; Editing by Dale Hudson)

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