Dell Profits Fall As They Go Private

Dell Headquarters in Red Rock, Texas | Wikipedia

Dell Headquarters in Red Rock, Texas | Wikipedia

Dell has reported another quarter of declining revenue as CEO Michael Dell continues to make the company private. It was the fifth consecutive quarter in which the PC maker’s profits shrank, and the fourth in which they’ve reported declining revenue.

Declining Profits; Transforming to “Solutions” Company

Revenue for Dell’s fourth fiscal quarter, which ended last February 1, declined 11 percent to $14.3 billion. The company’s net income was $530 million or $0.30 per share, a whopping decrease from $764 million or $0.43 per share in the previous year.

Profits from desktops and laptops, which constitutes half of the PC maker’s business, declined 20 percent in the quarter. Sales from storage and services also fell earlier this year. Only the company’s server and networking business saw an increase in sales of up to 18 percent.

Dell has been trying to reduce their dependence on PCs and remodeling it as a complete “solutions” company, which sells higher-margin software and services, in addition to PCs and servers. However, the transformation has been taking longer than investors expected.

Earlier this month, Michael Dell announced a plan to work with Silver Lake and take his company private in a $24.4 billion deal. Through this, the company can focus on longer-term investments without being scrutinized by Wall Street.

However, big shareholders are opposing this move, because they think that the $13.65 per share offered by the buyout group doesn’t reflect the company’s value. As pointed out by Donald Yacktman of Yacktman Asset Management, one of Dell’s big investors, the chances of the deal going through at its current valuation are “close to zero.”

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