* Another disappointing quarter as takeover battle looms
* Shares steady despite 79 pct profit drop
* No outlook provided because of go-private deal
By Poornima Gupta and Edwin Chan
SAN FRANCISCO, May 16 Dell Inc, the
subject of a takeover battle between activist investor Carl
Icahn and the company's billionaire founder, reported a 79
percent slide in profit as personal computer sales continued to
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.
Reflecting that shift in focus, Dell said on Thursday that
revenue from enterprise solutions, services and software jumped
12 percent to $5.5 billion, while overall revenue slipped 2
percent. Its "end-user computing division," linked to PC sales,
slid 9 percent.
To augment its enterprise business and go head-to-head with
more established players like International Business Machines
Corp and Hewlett-Packard Co, Dell is investing
heavily on research and sales to retain customers.
Icahn and major stakeholder Southeastern Asset Management,
however, dismiss Michael Dell's go-private deal as too cheap for
a company trying to become a major provider of enterprise
computing. They are proposing new leadership and additional cash
or stock for shareholders.
"Hardware margins were pretty abysmal, which should
generally support (Michael) Dell's bid," said Morningstar
analyst Carr Lanphier. "But Michael Dell's strategy is also to
be aggressive in pricing, to win key contracts."
"It doesn't seal the case one way or the other."
Icahn's and Michael Dell's battle over what direction to
take the company underscores the uncertainty in the PC industry,
which enjoyed more than a decade of roaring growth until the
advent of smartphones and tablets ended that era.
Now, the company that had been upheld as a model of
innovation as recently as the early 2000s is steadily ceding
ground to lower-cost Asian rivals and mobile hardware makers
like Apple Inc.
"We made progress in building our enterprise solutions
capabilities in the first quarter," Chief Financial Officer
Brian Gladden said. "We have taken actions to improve our
competitive position in key areas of the business, especially in
end-user computing, and it has affected profitability."
Margins on a GAAP basis slid to 19.5 percent from 21.3
percent a year earlier, as total operating expenses climbed 12
Net income fell to $130 million from $635 million a year
earlier. Excluding certain items, income was down 51 percent to
$372 million, or 21 cents a share, from $761 million, or 43
cents a share, a year earlier.
That lagged by far the 35 cents Wall Street had expected.
Revenue in its fiscal first quarter ended May 3 fell to
$14.1 billion, higher than the average analyst estimate of $13.5
billion according to Thomson Reuters I/B/E/S.
The company said it could not provide a financial outlook
because it was in the midst of Michael Dell's go-private deal.
Shares in Dell slid 3 cents to $13.40 in after-hours trade,
after closing at $13.43 on Nasdaq.