Sales fall at Dell ahead of buy-out

Computer maker Dell reported fiscal fourth-quarter sales and profit that topped analysts' estimates, although sales of personal computers slumped.

Revenues at the company, which is planning to go private in a $24.4 billion (€18.3bn) deal, fell 11 per cent to $14.3 billion in the period that ended in January, exceeding the $14.1 billion average estimate of analysts, according to data compiled by Bloomberg. Earnings excluding certain items declined to 40 cents a share, compared with analysts' 39-cent estimate.

Yesterday's results suggest chief executive officer Michael Dell has made headway in his campaign to transform the company into a provider of a broad range of business-technology products. Dell's earlier struggle to gain share in mobile devices and a late entrance into cloud computing contributed to a 31 per cent decline in its stock in 2012, prompting Dell to seek a buyout.

“The strength in the enterprise business indicates their focus on that business is working as they had thought,” said Abhey Lamba, an analyst at Mizuho Securities, adding, “Their focus is on the high-margin businesses, which is showing up in the results.”

Shares were little changed in late trading after slipping less than 1 per cent to $13.81 at yesterday's close in New York. Dell has risen 27 per cent since January 11th, the last trading day before it was announced that the company was in talks to go private.

Michael Dell and Silver Lake Management LLC offered $13.65 a share to take Dell private in the largest LBO since the financial crisis. Some stockholders want a higher price, and the results could strengthen their hand, Lamba said.

Dell didn't discuss the proposed transaction on a conference call yesterday, and CEO Dell didn't address analysts as he usually does.

Investors are more focused on the deal than quarterly results, said Shaw Wu, an analyst at Sterne Agee and Leach Inc.

“That seems to be more important than the quarter itself in determining the near-term stock direction,” said Wu, who has a neutral rating on Round Rock, Texas-based Dell. “The results won't matter as much.”

Fourth-quarter net income declined 31 per cent to $530 million, compared with analysts' $551 million estimate. Dell benefited from about $250 million in legal settlements during the quarter.

Robust demand for Dell's networking gear and servers, which run websites and corporate networks, offset weakness in other divisions. Server and networking sales rose 18 per cent to $2.62 billion last quarter. That partly offset a 14 per cent decline in desktop PCs and a 25 per cent slide in the company's mobility division, which included laptop computers.

Bloomberg