Dell’s profit dives as billionaire battle rages on

Dell, the subject of a takeover battle between activist investor Carl Icahn and the company's billionaire founder, reported a 79 per cent slide in profit as personal computer sales continued to shrink.

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 third-largest PC maker private for $24.4 billion (€19 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 revenue from enterprise solutions, services and software jumped 12 per cent to $5.5 billion, while overall revenue slipped 2 per cent. Its “end-user computing division”, linked to PC sales, slid 9 per cent.

To augment its enterprise business and go head-to-head with more established players like IBM and Hewlett-Packard, Dell is investing heavily on research and sales to retain customers.

Mr Icahn and major stakeholder Southeastern Asset Management, however, dismiss Mr 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.

Mr Icahn’s and Mr 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.

Margins on a GAAP basis slid to 19.5 per cent from 21.3 per cent a year earlier, as total operating expenses climbed 12 percent.

Net income fell to $130 million from $635 million a year earlier. Excluding certain items, income was down 51 per cent to $372 million, or 21 US cents a share, from $761 million, or 43 US cents a share, a year earlier, well behind analyst expectations. – (Reuters)